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1.
If an investor is not afraid of taking risks, he or she is risk-averse.
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False. Risk-averse people are, to varying extents, wary of risk and do not invite it.
2.
What assumption does Modern Portfolio Theory make regarding risk?
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Investors want to avoid unnecessary risk. The theory seeks the maximum return on a low level of risk.
3.
An optimal portfolio receives the highest returns on investments with the highest risks.
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False. An optimal portfolio meets expected returns with the smallest possible risk.
4.
The risk of a portfolio asset being affected by market changes is called systematic risk.
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True. The risk of a portfolio asset being affected by market changes is called systematic risk.
5.
The main benefit of an efficient portfolio is high returns.
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False. The main benefit of an efficient portfolio is low volatility for a given level of return.