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Which of the following statements is (are) false? Question options: a. All mean-variance efficient portfolios are...

Which of the following statements is (are) false? Question options:

a. All mean-variance efficient portfolios are combinations of the market portfolio and the risk-free asset

b. If two mean-variance efficient portfolios are combined, the result is a mean-variance efficient portfolio

c. If the market portfolio is the tangency portfolio, then the relationship between risk and return is best described as parabolic

d. All of the above are true statements

(already picked "b" and it was wrong).

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Homework Answers

Answer #1

Only option b is wrong.

b. If two mean-variance efficient portfolios are combined, the result is a mean-variance efficient portfolio is not correct.

Let's look at each options individually :

a. One fund theorem states that "Any efficient portfolio (any point on the upper tangent line) can be expressed as a combination of the risk free asset and the portfolio (or fund) represented by F. Hence this statement is correct

b. This statement is not correct since it would depend on correlation between the 2 portfolios.

c. This statement is correct (Theoritical)

Please do rate me and mention doubts in the comments section.

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