CHAPTER 21 QUIZ 1 TO 5
1. The idea behind the portfolio effect is that risk can be reduced by combining securities, but there will be a corresponding reduction in
return.
2. Harry Markowitz developed the theory that an efficient set of portfolios exists which represent the maximum return possible for any given
level of risk.
3. Markowitz' theory asserts that the slope of indifference curves is determined by the investor's indifference to various portfolios.
4. According to the capital asset pricing model, it is possible to compose a portfolio with a return greater than any one on the efficient
frontier given equal risk without borrowing funds for investment.
5. The capital market line enables investors to achieve a higher level of utility than they could on the efficient frontier.
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