Given the Capital Allocation Line, an Investor's Optimal Portfolio Is

question 23

Multiple Choice

Given the capital allocation line, an investor's optimal portfolio is the portfolio that

• A) maximizes her expected profit.
• B) maximizes her risk.
• C) minimizes both her risk and return.
• D) maximizes her expected utility.
• E) None of the options are correct.

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Definitions:

Straight-Line Method

A depreciation technique that allocates an equal portion of an asset’s cost to each year of its useful life.

Residual Value

The estimated value of a fixed asset at the end of its useful life, reflecting what it could be sold for or its disposal cost.

Depreciation

An accounting method of allocation that spreads the cost of an asset over its useful life to account for its decrease in value over time.

Book Value

The net value of a company's assets minus its liabilities, often used to assess a company's worth.