If an investor has a portfolio that has constant proportions in T-bills and the market portfolio, the portfolio's characteristic line will plot as a line with ___________; if the investor can time bull markets, the characteristic line will plot as a line with ___________.
A)a positive slope; a negative slope
B)a negative slope; a positive slope
C)a constant slope; a negative slope
D)a negative slope; a constant slope
E)a constant slope; a positive slope

Question

Quizplus · Accepted Answer

These characteristics are shown in Figure 24.5.If the proportions are constant the beta of the portfolio stays constant.If the investor switches the proportions in favor of the marker portfolio to take advantage of bull markets the beta will increase during times of higher market risk premiums.This will cause the slope of the curve to increase.

If an Investor Has a Portfolio That Has Constant Proportions