Author Question: Which of the following is correct regarding the SML? (Read 49 times)

Hunchojack2019!! · **on:** Aug 7, 2023

Question 1

Which of the following is correct regarding combining two negatively correlated assets into a portfolio?

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it will reduce portfolio risk

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it will not affect portfolio risk

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it will increase portfolio standard deviation

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it will keep portfolio returns unchanged

Question 2

Which of the following is correct regarding the SML?

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The greater the marginal investor’s risk aversion, the flatter the SML.

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The lower the marginal investor’s risk aversion, the more positive the SML slope.

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The lower the marginal investor’s risk aversion, the steeper the SML.

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The lower the marginal investor’s risk aversion, the flatter the SML.

Khareemom14 · **Reply #1 on:** Aug 7, 2023

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