The Separation Principle States That an Investor Will

question 56

Multiple Choice

The separation principle states that an investor will:

• A)choose between any efficient portfolio and a riskless asset to generate the desired expected return.
• B)choose a portfolio from the efficient set based on individual risk tolerance.
• C)never choose to invest in a riskless asset due to the low expected rate of return.
• D)combine a riskless asset with the tangency portfolio based on their risk tolerance level.
• E)combine a riskless asset with the minimum variance portfolio based on their risk tolerance level.

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Definitions:

Price

The amount of money expected, required, or given in payment for something.

Implied Claims

Statements or messages that are suggested indirectly in communication, rather than being explicitly stated.

Bait-and-Switch Advertising

A deceptive marketing strategy where a product is advertised at a low price to lure customers, who are then persuaded to buy a more expensive item.

Product Benefit

The positive outcomes or advantages that a consumer can expect to gain from using a product.