Derivatives Markets

4. Determine which of the following are FALSE. 1. We can rule out inefficient portfolios because they represent inferior investment choices. II. The volatility of the portfolio will differ, depending on the correlation between the securities in the portfolio. III. Correlation has an effect on the expected return of a portfolio. IV. When two stocks are perfectly negatively correlated, it becomes possible to hold a portfolio that bears no risk. AI C) III E) None are false B) II D) IV