Asked by Saadak Ahmed Mohamud on Jun 06, 2024
Verified
The underlying principles of portfolio theory include:
A) diversifying business-specific risk away.
B) basing decisions on stocks' risk/return characteristics in a portfolio context rather than on a stand-alone basis.
C) getting the highest available return for the amount of risk the investor is comfortable with.
D) All of the above
Portfolio Theory
A framework for constructing a portfolio of assets aimed at maximizing return for a given level of risk.
Business-Specific Risk
Variation in the return on a stock investment caused by things that affect specific businesses or industries.
- Comprehend the essential elements of portfolio theory and their effects on the process of investing.
Verified Answer
AG
Aryan GulsiaJun 10, 2024
Final Answer :
D
Explanation :
All the given options are underlying principles of portfolio theory. Diversifying helps in reducing risk, considering risk/return characteristics on a portfolio level helps in maximizing returns, and choosing a risk level that the investor is comfortable with is essential for successful portfolio management.
Learning Objectives
- Comprehend the essential elements of portfolio theory and their effects on the process of investing.
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