Separation theorem tells investors that they can separate:
A) systematic risk from non-systematic risk.
B) diversifiable risk from non-diversifiable risk.
C) the investment decision from the financing decision.
D) stocks from bonds.

Question

Quizplus · Accepted Answer

The separation theorem, particularly in the context of the Fisher Separation Theorem, posits that a firm's investment decisions are separate from its financing decisions. This means that the choice of investments can be made independently of the preferences and wealth of the investors.

Separation Theorem Tells Investors That They Can Separate