Different Investors Estimate the Inputs to the Markowitz Model Differently

question 9

Multiple Choice

Different investors estimate the inputs to the Markowitz model differently because:

• A)every investor has his/her own risk/return preferences.
• B)every investor has access to different information about securities.
• C)there is an inherent uncertainty in security analysis.
• D)there is a random selection process used by individual investors.

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Definitions:

Installment Payment Plan

A financial arrangement that allows a buyer to pay for goods or services over a period of time in several smaller payments.

Bankruptcy

The state of being bankrupt, being legally declared unable to pay debts; a petition to a court by an individual who is stating that he or she cannot pay any debt incurred.

Collection Agency Transaction

A financial activity where a collection agency attempts to recover funds owed by an individual or business.

Outsourcing

An arrangement by which a task, operation, or job that could be performed by employees within a company is instead contracted to another company; generally viewed as contracting out a specific business function to another company rather than having your own company manage that specific work.