Joseph Chooses a Combination of Apples and Oranges Along His

question 131

Multiple Choice

Joseph chooses a combination of apples and oranges along his budget line.The marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.25.Joseph:

• A)is maximizing total utility.
• B)should consume more apples and fewer oranges to maximize total utility.
• C)should consume fewer apples and more oranges to maximize total utility.
• D)may or may not be maximizing total utility.

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Definitions:

Black-Litterman Model

A portfolio allocation model that combines expected returns based on equilibrium assumptions with the views of an investor.

Portfolio Manager

A professional responsible for making investment decisions and overseeing a portfolio of assets to achieve the investment objectives of their clients or institution.

Tracking Error

A measure of the deviation from the performance of a benchmark by an investment portfolio.

Optimized Portfolio

A portfolio of investments that has been designed to achieve the best possible balance of risk and return, based on specific investor goals and constraints.