Figure 19-5.On the graph,x represents risk and y represents return.
-Refer to Figure 19-5.Which of the following statements is correct?
A) At point A the standard deviation of the portfolio is 3.
B) A risk averse person always will choose to be at point A.
C) At point D the portfolio consists of about 15 percent stocks and 85 percent safe assets.
D) The figure shows that the greater the risk,the greater the return.

Question

Figure 19-5.On the graph,x represents risk and y represents return. 
-Refer to Figure 19-5.Which of the following statements is correct?
A) At point A the standard deviation of the portfolio is 3. 
B) A risk averse person always will choose to be at point A. 
C) At point D the portfolio consists of about 15 percent stocks and 85 percent safe assets. 
D) The figure shows that the greater the risk,the greater the return.

Quizplus · Accepted Answer

The graph shows a positive relationship between risk and return, indicating that the greater the risk, the greater the return. Option A is incorrect because the graph does not provide information on the standard deviation of the portfolio at point A. Option B is incorrect because risk-averse individuals may choose to be at point A or any other point depending on their risk tolerance. Option C is incorrect because the graph does not provide information on the composition of the portfolio at point D.