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Portfolios 503: Modern Portfolio Theory

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1.
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.
2.
The lower the volatility of an investment, the _______ its reward.
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Lower. Safe investments do not reward their owners as well as volatile ones do.
3.
An efficient portfolio seeks the highest return for the________.
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Lowest volatility. The theory helps you to locate the best-performing set of assets for the lowest amount of volatility.
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.
An efficient portfolio is likely to consistently beat the market.
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False. Efficient portfolios are not likely to beat the market.