The Markowitz Model Is Based on Several Assumptions Regarding Investor

question 5

Multiple Choice

The Markowitz model is based on several assumptions regarding investor behavior.Which of the following is not such any assumption?

• A) Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period.
• B) Investors maximize one-period expected utility.
• C) Investors estimate the risk of the portfolio on the basis of the variability of expected returns.
• D) Investors base decisions solely on expected return and risk.
• E) None of the above (that is, all are assumptions of the Markowitz model)

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Definitions:

Weighted Average Method

This inventory costing method calculates the cost of goods sold and ending inventory balance using the average cost of all similar items in inventory, weighted by the number of units.

Physical Units Method

An inventory costing method that allocates expenses based on the physical units produced or available, commonly used for homogeneous products.

Actual Physical Units

Actual physical units refer to the tangible quantity of items produced, held in inventory, or sold, as measured by physical count.

Joint Costs

Costs that are incurred in the process of producing two or more products simultaneously and cannot be easily separated for each product.