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Chapter 8 - Study Guide - Chapter 8 PORTFOLIO SELECTION...

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Chapter 8 PORTFOLIO SELECTION Multiple Choice Questions 1. According to Markowitz, rational investors will seek efficient portfolios because these portfolios are optimal based on: a. expected return. b. risk. c. expected return and risk. d. transactions costs. (c) 2. Under the Markowitz model, investors: (b) 3. Which of the following is not one of the assumptions of portfolio theory? (c) 4. The Markowitz model assumes most investors are: (a) Chapter Eight Portfolio Selection 94
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5. The optimal portfolio for a risk-averse investor: a. cannot be determined. b. occurs at the point of tangency between the highest indifference curve and the highest expected return. c. occurs at the point of tangency between the highest indifference curve and the efficient set of portfolios. d. occurs at the point of tangency between the highest expected return and lowest risk efficient portfolios. (c) 6. According to Markowitz, an efficient portfolio is one that has the (c)
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