All of the Following Are Assumptions of the Markowitz Model

question 32

Multiple Choice

All of the following are assumptions of the Markowitz model except

• A) Risk is measured based on the variability of returns.
• B) Investors maximize one-period expected utility.
• C) Investors' utility curves demonstrate properties of diminishing marginal utility of wealth.
• D) Investors base decisions solely on expected return and time.
• E) All of the above

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Definitions:

Required Reserve Ratio

The fraction of deposits that regulators require a bank to hold in reserve and not lend out.

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, central bank or other governing bodies.

Ten Principles of Economics

A foundational concept in economics that outlines the basic principles guiding economic decisions and behaviors, such as scarcity, cost, and efficiency.

Fed

The Federal Reserve System, the central banking system of the United States, which regulates the U.S. monetary and financial system.