Which of the Following Statement(s)is(are)true Regarding the Selection of a Portfolio

question 38

Multiple Choice

Which of the following statement(s) is(are) true regarding the selection of a portfolio from those that lie on the Capital Allocation Line?

• A) Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors.
• B) More risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors.
• C) Investors choose the portfolio that maximizes their expected utility.
• D) a and c.
• E) b and c.

---

Definitions:

Marginal Product

The boost in production one can expect by adding an extra unit of labor or capital, ceteris paribus.

Wage Rate

The amount of compensation workers receive in exchange for their labor, typically expressed per hour or per unit of work.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts as well as the physical factors of production.

Expansion Path

A curve that shows how the input combinations of a firm change as it increases output, keeping the input ratios constant.