equal to the sum of the

securities' standard deviations.

greater

than zero.

equal

to zero.

between

zero and -1.

equal

to -1.

the rate that the investor must earn for certain to give up the use of his money.

the rate that a risk-free investment would need to offer with certainty to be considered equally attractive as the risky portfolio.

represented by the scaling factor "-0.5" in the utility function.

the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk-averse investors.

the minimum rate guaranteed by institutions such as banks.

I

and III

II

and III

II

only

I

only

III

only

investors

are separate beings and will therefore have different preferences regarding the

risk-return tradeoff.

the

choice of inputs to be used to determine the efficient frontier is objective

and the choice of the best CAL is subjective.

the

choice of the best complete portfolio is objective and the determination of the

best risky portfolio is objective.

the

determination of the best risky portfolio is objective and the choice of the

best complete portfolio is subjective.

the

determination of the best CAL is objective and the choice of the inputs to be

used to determine the efficient frontier is subjective.

I and II

I, II, and III

II and III

I and III

the

portion of the investment opportunity set that represents the highest standard

deviations.

the

set of portfolios that have zero standard deviation.

the

portion of the investment opportunity set that lies above the global minimum

variance portfolio.

both

the portion of the investment opportunity set that lies above the global

minimum variance portfolio and the portion of the investment opportunity set

that represents the highest standard deviations.

the

portion of the investment opportunity set which includes the portfolios with

the lowest standard deviation.

1,140.72

1,004.84

990.84

1,132.82

0.076;

0.071

0.076;

0.020

0.087;

0.124

0.114;

0.126

2.1

2.6

2.8

2.0

7.5%

5.50%

7%

6.25%