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CIMA
| Term | Definition |
|---|---|
| The variance of a portfolio of risky securities is the _______ _____ of the securities _______ and ______ | weighted sum; variances and covariances |
| The expected return of a portfolio of risky securities is a | weighted average of the securities returns |
| Diversification is most effective when securities returns are | negatively correlated |
| The efficient frontier of risky assets is the portion of the investment opportunity set that lies | above the global minimum variance portfolio |
| Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always | equal to zero |
| The market portfolio _____ all publicly traded financial assets | includes |
| the market portfolio lies on the | efficient frontier |
| all securities in the market portfolio are held in _____ to their market _____ | proportion; values |
| The capital market line (CML) is the line from the _____ through the ______ | risk-free rate; market portfolio |
| The CML is the best attainable _______ | capital allocation line |
| The CML always has a positive | slope |
| The risk measure for the CML is | standard deviation |
| Efficient portfolios of risky securities are portfolios that have the ______ rates of return for a given level of _____ | highest; risk |
| More risk averse investors will invest _____ in the optimal risky portfolio and _____ in the risk-free security | less; more |
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Jennifermtfl6