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Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused the: Select one: a. Nondiversifiable risk to be eliminated. b. Portfolio beta to equal zero. O c. Expected return of the portfolio to equal the market expected return. d. Risk premium to equal one. e. Portfolio standard deviation to equal one.
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Answer #1

Answer : "e. Portfolio standard deviation to equal one."

=> So, if the variances of all securities and their combination in the portfolio comes to one, then we can call a portfolio with Risky assets to be a Risk-free portfolio. This is because Portfolio standard deviation is the square root of all weighted sum of the security assets variances and the co-variances.

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