The Separation Principle States That an Investor Will

question 58

Multiple Choice

The separation principle states that an investor will:

• A)choose any efficient portfolio and invest some amount in the riskless asset to generate the
• Expected return.
• B)choose an efficient portfolio based on individual risk tolerance or utility.
• C)never choose to invest in the riskless asset because the expected return on the riskless
• Asset is lower over time.
• D)invest only in the riskless asset and tangency portfolio choosing the weights based on
• Individual risk tolerance.
• E)All of the above.

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