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What is the fundamental motivation behind portfolio theory

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Question 1. What is the fundamental motivation behind portfolio theory? That is, what are people trying to achieve by investing in portfolios of stocks rather than in a few individual stocks or in debt? What observations prompted this view?

Question 2. What is the general (in words) relationship between risk and return?

Question 3. Give a verbal definition of risk that's consistent with the way we use the word in everyday life. Discuss the weaknesses of that definition for financial theory.

Reference no: EM132650643

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