According to Tobin's Separation Property, Portfolio Choice Can Be Separated

question 77

Multiple Choice

According to Tobin's separation property, portfolio choice can be separated into two independent tasks consisting of ________ and ________.

• A) identifying all investor imposed constraints; identifying the set of securities that conform to the investor's constraints and offer the best risk-return trade-offs
• B) identifying the investor's degree of risk aversion; choosing securities from industry groups that are consistent with the investor's risk profile
• C) identifying the optimal risky portfolio; constructing a complete portfolio from T-bills and the optimal risky portfolio based on the investor's degree of risk aversion
• D) choosing which risky assets an investor prefers according to the investor's risk-aversion level; minimizing the CAL by lending at the risk-free rate

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Definitions:

Variable Cost

Costs that vary directly with the level of production or output.

Monthly Sales Volume

The total amount of a product or service sold by a company within the span of a month.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, or insurance.

Monthly Sales Volume

The total quantity of products or services sold by a company in a month.