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Modern Portfolio Theory is based on the relationship between risk and volatility.

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True

False

False. Modern Portfolio Theory is based on the relationship between risk and reward.

Efficient portfolios achieve low volatility by _______.

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Asset allocation

Investing only in low-risk securities

Controlling the markets

Asset allocation. Efficient portfolios achieve low volatility by diversifying.

Modern Portfolio Theory is based on the assumption that _______.

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Investors like risk

Investors dislike risk

Investors always strive for the highest returns

Investors dislike risk. Modern Portfolio Theory is based on the assumption that investors dislike risk but want the highest return for low levels of risk.

The risk of a portfolio asset being affected by market changes is called systematic risk.

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True

False

True. The risk of a portfolio asset being affected by market changes is called systematic risk.

If an investor is not afraid of taking risks, he or she is risk-averse.

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True

False

False. Risk-averse people are, to varying extents, wary of risk and do not invite it.

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