Figure 27-5.On the graph,x represents risk and y represents return.
-Refer to Figure 27-5.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 27-5.On the graph,x represents risk and y represents return. 
-Refer to Figure 27-5.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 figure shows a positive correlation between risk and return, indicating that the greater the risk, the greater the return. Points A and D are not accurately described by statements A and C, respectively. Statement B is incorrect because risk aversion varies among individuals and is not always the deciding factor in portfolio selection.