Asset Allocation Affects the Investor's Return by

question 2

Multiple Choice

Asset allocation affects the investor's return by

• A) altering the returns on individual assets
• B) weighting the portfolio returns by the allocation
• C) assuring diversification
• D) increasing the investor's use of mutual funds

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Definitions:

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the overall returns will eventually decrease after a certain point.

Marginal Product

The additional output that results from using one more unit of a particular input, while holding other inputs constant.

Average Product

The output obtained by dividing the total product by the number of units of the variable input used in production, ideally reflecting productivity per input unit.

Total Product

The total output or quantity of goods produced by a firm or economy at a given level of input.