The separation principle states that an investor will

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The separation principle states that an investor will:

choose any efficient portfolio and invest some amount in the riskless asset to generate the expected return.

never choose to invest in the riskless asset because the expected return on the riskless asset is lower over time.

invest only in the riskless asset and tangency portfolio choosing the weights of each based on his/her individual risk tolerance.

randomly select any efficient portfolio.

select a portfolio based solely on his/her desired rate of return while ignoring the associated risks of their selection.

Reference no: EM131569545

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