You are presented with information on expected returns and standard deviations f

Question

You are presented with information on expected returns and standard deviations for 3 assets and a portfolio that was formed with equal proportions of each asset. Asset J Asset K Asset L 0.0800 0.1200 0.0914 Portfolio Expected return 0.03 0.0767 Variance 0.0842 0.0566 0 Which of the following statements is true (there are several, select all that are correct): If you wish to have a portfolio with zero risk, you would invest 100% in Asset J If you want to decrease the risk (standard deviation) of the portfolio, you will increase the proportion to invest in asset J and reduce the proportions in Assets K and/or L

Explanation / Answer

1.

If you wish to have zero risk invest 100% in J

2.

To decrease the risk increase proportion of J and decrease K and L

3.

Zero risk return is 3%

A,B and C are only correct

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