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500
Portfolios 503:
Modern Portfolio Theory
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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Review your answers below to learn more.
1.
An efficient portfolio is likely to consistently beat the market.
Choose wisely. There is only one correct answer.
True
False
False. Efficient portfolios are not likely to beat the market.
2.
If you invest in a portfolio at the bottom of the efficient frontier curve, the portfolio has _______.
Choose wisely. There is only one correct answer.
High returns and high risk
High returns and low risk
Low returns and high risk
Low returns and low risk
Low returns and low risk. The bottom of the efficient frontier involves low risk and low return.
3.
What assumption does Modern Portfolio Theory make regarding risk?
Choose wisely. There is only one correct answer.
Investors welcome risk.
Investors want to avoid unnecessary risk.
Risk is healthy.
Low risk can yield high returns.
Investors want to avoid unnecessary risk. The theory seeks the maximum return on a low level of risk.
4.
If an investor is not afraid of taking risks, he or she is risk-averse.
Choose wisely. There is only one correct answer.
True
False
False. Risk-averse people are, to varying extents, wary of risk and do not invite it.
5.
The risk of a portfolio asset being affected by market changes is called systematic risk.
Choose wisely. There is only one correct answer.
True
False
True. The risk of a portfolio asset being affected by market changes is called systematic risk.
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DONE