Asked by Joseph Amberg on May 26, 2024
Verified
The separation property refers to the conclusion that
A) the determination of the best risky portfolio is objective, and the choice of the best complete portfolio is subjective.
B) the choice of the best complete portfolio is objective, and the determination of the best risky portfolio is objective.
C) the choice of inputs to be used to determine the efficient frontier is objective, and the choice of the best CAL is subjective.
D) the determination of the best CAL is objective, and the choice of the inputs to be used to determine the efficient frontier is subjective.
E) investors are separate beings and will, therefore, have different preferences regarding the risk-return tradeoff.
Separation Property
The property that portfolio choice can be separated into two independent tasks: (1) determination of the optimal risky portfolio, which is a purely technical problem, and (2) the personal choice of the best mix of the risky portfolio and the risk-free asset.
Risky Portfolio
An investment portfolio that contains assets with a higher degree of risk, potentially leading to higher returns or greater losses.
Complete Portfolio
The entire portfolio, including risky and risk-free assets.
- Examine the property of separation and its consequences for making investment choices.
Verified Answer
Learning Objectives
- Examine the property of separation and its consequences for making investment choices.
Related questions
When Transferring Investments Between Categories, Unrealized Holding Gains for Securities ...
A Transfer of a Security Between Categories Is Accounted for ...
Which of the Following Statements Is False ...
The Level of Investment Will Tend to Rise as the ...
If Gross Investment Is Less Than Depreciation,then Net Investment Is ...