What is the first step an investor takes when making an investment decision according to the separation principle?
A)Determine the mix of risky and risk-free assets he/she will hold
B)Quantify the amount of risk he/she is willing to accept
C)Estimate future inflation and risk-free rates
D)Determine the portfolio of risky assets that he/she will hold
E)Specify a desired rate of return

Question

Quizplus · Accepted Answer

The separation principle suggests that the first step is to determine the optimal portfolio of risky assets, independent of the investor's risk preferences.

What Is the First Step an Investor Takes When Making