You are given a two asset portfolio with a fixed correlation coefficient.If the weights of the two assets are varied the expected portfolio return would be ____ and the expected portfolio standard deviation would be ____.
A) Nonlinear, elliptical
B) Nonlinear, circular
C) Linear, elliptical
D) Linear, circular
E) Circular, elliptical

Question

Quizplus · Accepted Answer

If the correlation coefficient between the two assets is fixed, then the expected portfolio return would be a linear combination of the expected returns of the two assets. The expected portfolio standard deviation would be elliptical because as the weights of the assets are varied, the standard deviation of the portfolio will change non-linearly, resulting in an elliptical shape. Therefore, the correct answer is C: Linear, elliptical.

You Are Given a Two Asset Portfolio with a Fixed