Q:
Which of the following is the most true regarding the type of assets found along the efficient frontier?
a) Exclusively portfolios consisting of several different assets.
b) Portfolios consisting of several different imperfectly correlated assets, as well as individual securities at certain points.
c) Portfolios consisting of several different perfectly correlated assets, as well as individual securities at certain points.
d) Individual securities, with some portfolios consisting of imperfectly correlated assets.
A:
The correct answer is b.
The efficient frontier is comprised mainly of portfolios that contain several imperfectly correlated assets. In some cases, individual securities can be located on the end points of the curve.
The efficient frontier would not be mainly comprised of portfolios containing perfectly correlated assets as these portfolios are not benefiting from diversification.

RELATED FAQS

  1. Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although ...

    The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
  2. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  3. According to SEC Release IA-1092, which of the following would NOT qualify as an ...

    The correct answer is C). SEC Release IA-1092 considers financial planners, pension consultants and sports and entertainment ...
  4. Your client, Todd, owns 100 shares HAT stock in his taxable stock portfolio ...

    The correct answer is a): Since Todd owns the stock and expects another stagnant year ahead, he would employ a covered call ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!