1. Dominant Portfolios Determine which one of these three portfolios dominates a

Question

1. Dominant Portfolios Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 14 percent and risk of 19 percent. The expected return and risk of portfolio Yellow are 15 percent and 18 percent, and for the Purple portfolio are 16 percent and 21 percent.

A. Portfolio Purple dominates Portfolio Blue

B. Portfolio Blue dominates Portfolio Yellow

C. Portfolio Yellow dominates Portfolio Blue

D. Portfolio Purple dominates Portfolio Yellow

2. This is a measurement of the co-movement between two variables that ranges between -1 and +1.

A. coefficient of variation

B. standard deviation

C. correlation

D. total risk

3. Which of the following is NOT a capital market instrument?

A. U.S. Treasury bills

B. Corporate stocks and bonds

C. U.S. Treasury notes and bonds

D. U.S. government agency bonds

Explanation / Answer

Answer 1 - Option D - Portfolio Purple dominates Portfolio Yellow

Answer 2 - Option A - coefficient of variation

Answer 3 - Option A - U.S. Treasury bills

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