Which One of the Following Statements Is Correct Concerning the One

question 39

Multiple Choice

Which one of the following statements is correct concerning the one stage approach being theoretically superior vis-a-vis the two-stage approach to security selection?

• A) The two-stage approach allows managers too much freedom to violate the risk-return preferences of the client.
• B) The two-stage approach does not allow managers to specialize in one particular asset class.
• C) The one-stage approach is superior because it uses all available information relevant to the construction of an optimal portfolio.
• D) The one-stage approach is preferred by most investment managers because it is simpler and cheaper to implement.

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Definitions:

One Page

Typically referring to documents, especially resumes or brief reports, that are concise enough to fit on a single page with the aim of clear and immediate communication.

Two Pages

Typically refers to a document or written material consisting of two sides of a sheet of paper.

Negative External Effects

Negative impacts of an economic activity on third parties who are not directly involved in the transaction.

Efficient Outcome

A situation where resources are allocated in the most effective manner, maximizing benefits and minimizing waste.