As the correlation coefficient between two assets decreases,the shape of the efficient frontier
A) approaches a horizontal straight line.
B) bends out.
C) bends in.
D) approaches a vertical straight line.
E) none of the above.

Question

Quizplus · Accepted Answer

As the correlation coefficient between two assets decreases, the diversification benefits increase, causing the efficient frontier to bend inwards, indicating a more optimal risk-return trade-off.

As the Correlation Coefficient Between Two Assets Decreases,the Shape of the Efficient