1- Assume that expected returns and standard deviations for all securities (including the risk-free rate for borrowing and lending) are known. In this case, all investors will have the same optimal risky portfolio. True False

2- Which of the following statement(s) is(are) true regarding the variance of a portfolio of two risky securities?

1. I) The higher the coefficient of correlation between securities, the greater the reduction in the portfolio variance.
2. II) There is a linear relationship between the securities' coefficient of correlation and the portfolio variance.
3. III) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities

3-An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the same capital allocation line must:

		Borrow some money at a higher rate than the risk-free rate, and invest only in risky securities.
		Such a portfolio cannot be formed.
		Lend some of her money at a risk-free rate.
		Borrow some money at the risk-free rate, invest in the optimal risky portfolio, and invest only in risky securities.