
Concept explainers
a.
To discuss: If an individual would hold gold over stock and construct a graph for the same.
Introduction: An investor may invest in various stocks to reduce the risk of losses. Such a theory is called correlation theory. It is believed that an investor takes a lot of risk to achieve higher
b.
To discuss: If an individual would hold gold over stock and construct a graph for the same given that the correlation between gold and stock is + 1.
Introduction: An investor may invest in various stocks to reduce the risk of losses. Such a theory is called correlation theory. It is believed that an investor takes a lot of risk to achieve higher returns on their investment portfolio.
c.
To discuss: If the given data and assumption of correlation represent equilibrium in security market.
Introduction: An investor may invest in various stocks to reduce the risk of losses. Such a theory is called correlation theory. It is believed that an investor takes a lot of risk to achieve higher returns on their investment portfolio.

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