There Have Been Two Major Attacks on Standard Portfolio Theory

question 53

Multiple Choice

There have been two major attacks on standard portfolio theory. Which of the below is ONE of these?

• A) One is the attack by the behavioral finance camp as to how consumers make decisions.
• B) One is the attack on the nature of the return distribution based on what has been theoretically decreed for financial assets.
• C) One is the attack on binomial distribution of returns assumed for financial assets.
• D) One is the attack by the behavioral finance camp as to how investors make decisions.

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Definitions:

Strip Bond

A debt security that has had its principal and coupon payments detached and sold separately.

Compounded Semi-annually

Interest calculated on the initial principal and the interest that has been added on a bi-annual basis.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Hourly Rate

The amount of money paid or earned for each hour of work.