Use the table for the question(s)below.
Consider the following covariances between securities:
-Which of the following statements is FALSE?
A)When stocks are perfectly positively correlated,the set of portfolios is identified graphically by a straight line between them.
B)An investor seeking high returns and low volatility should only invest in an efficient portfolio.
C)When the correlation between securities is less than 1,the volatility of the portfolio is reduced due to diversification.
D)Efficient portfolios can be easily ranked,because investors will choose from among them those with the highest expected returns.

Question

Use the table for the question(s)below.
Consider the following covariances between securities: 
-Which of the following statements is FALSE?
A)When stocks are perfectly positively correlated,the set of portfolios is identified graphically by a straight line between them. 
B)An investor seeking high returns and low volatility should only invest in an efficient portfolio. 
C)When the correlation between securities is less than 1,the volatility of the portfolio is reduced due to diversification. 
D)Efficient portfolios can be easily ranked,because investors will choose from among them those with the highest expected returns.

Quizplus · Accepted Answer

Efficient portfolios cannot be easily ranked solely based on expected returns, as different investors may have different risk preferences and therefore prefer different efficient portfolios. The ranking of efficient portfolios also takes into consideration the level of risk associated with each portfolio.

Use the Table for the Question(s)below