Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused the:
A) Portfolio standard deviation to equal one.
B) Expected return of the portfolio to equal the market expected return.
C) Portfolio beta to equal zero.
D) Risk premium to equal one.
E) Nondiversifiable risk to be eliminated.

Question

Quizplus · Accepted Answer

A risk-free portfolio theoretically can be created by combining risky securities in such a way that their different risks offset each other, resulting in a portfolio beta of zero. Beta measures a security's or portfolio's volatility in relation to the market; a beta of zero implies no volatility in comparison to the market, effectively making it risk-free in terms of market risk.

Theoretically, a Risk-Free Portfolio Could Be Created by Combining Risky