Reference no: EM132928822
Problem 1: Which of the following statement(s) is (are) false regarding the selection of a portfolio from those that lie on the Capital Allocation Line?
A. Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors.
B. More risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors.
C. Investors choose the portfolio that maximizes their expected utility.
D. Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors and more risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors.
E. Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors and investors choose the portfolio that maximizes their expected utility.
Problem 2: The expected return of a portfolio of risky securities
A. is a weighted average of the securities' returns.
B. is the sum of the securities' returns.
C. is the weighted sum of the securities' variances and covariances.
D. is both a weighted average of the securities' returns and a weighted sum of the securities' variances and covariances.
E. is the weighted sum of the securities' covariances.
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