25. Owning two securities instead of one will not reduce the risk taken by an investor two securities are if the a. perfectly positively correlated with each other b. perfectly independent of each other c. perfectly negatively correlated with each other d. of the same category, e.g. blue chips 26. When the covariance is positive, the correlation will be: a. positive b. negative c. zero d. impossible to determine 27. According to Markowitz, rational investors will seek efficient portfolios because these portfolios are optimal based on: a. expected return. b. risk. c. expected return and risk d. transactions costs. 28. An indifference curve shows: a. the one most desirable portfolio for a particular investor b. all combinations of portfolios that are equally desirable to a particular investor c. all combinations of portfolios that are equally desirable to all investors d. the one most desirable portfolio for all investors 29.. The optimal portfolio for a risk-averse investor a. cannot be determined b. occurs at the point of tangency between the highest indifference curve and the highest c. occurs at the point of tangency between the highest indifference curve and the efficient d. occurs at the point of tangency between the highest expected return and lowest rislk expected return set of portfolios efficient portfolios