The Separation Principle States That an Investor Will

question 65

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

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Definitions:

Type D Personality

A personality disposition characterized by high negative affectivity (e.g., worry, irritation) and social inhibition (reticence and a lack of confidence in social interactions).

Trouble Sleeping

Difficulties in falling or staying asleep, which can lead to decreased quality of life and health issues.

Type T Personality

A term used to describe individuals who crave excitement, are risk-takers, and often seek out thrilling experiences.

Thrill-Seeking

The pursuit of activities that provide a rush of adrenaline, such as extreme sports or adventurous experiences.