Quiz 3 - Quiz3 DueonNovember19 1 i () other ii iii

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Quiz 3 Due on November 19 1. Which of the following statements are true? i. Any two portfolios on the efficient frontier can be compared and all investors  (irrespective of their risk preferences) would prefer the same portfolio over the  other.   ii. Portfolios above the efficient frontier are unattainable. iii. Portfolios below the efficient frontier are inferior portfolios and must be avoided. A. i and ii B. i and iii C. ii and iii D. i, ii, and iii E. None of the above 2. Assume assets A and B are perfectly negatively correlated ( the correlation coefficient of  returns is -1). Asset A has a standard deviation of returns of 0.35 and that of asset B is  0.55. If the two assets are to be combined to form a completely risk-free portfolio, what  fraction of the total investment should be in asset A? A. 39% B. 43% C. 48% D. 52%
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E. 61% 3. One of the keys to successful investment management is efficient diversification. The  extent of risk reduction of a portfolio depends on the correlation of returns of individual  assets in the portfolio. The lower the correlation of returns among the assets  (comparisons are made taking into account the sign of the correlation coefficient), the  greater is the reduction of risk. A.
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This note was uploaded on 10/16/2010 for the course COMM Comm 308 taught by Professor Ravimateti during the Fall '09 term at Concordia Canada.

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Quiz 3 - Quiz3 DueonNovember19 1 i () other ii iii

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