Two important assumptions of portfolio theory are:
A)returns from investments are normally distributed and investors seek to minimise transaction costs.
B)returns from investments are normally distributed and investors are risk averse.
C)returns on a portfolio are normally distributed and investors are risk averse.
D)the standard deviation of returns on a portfolio is normally distributed and investors are risk averse.

Question

Quizplus · Accepted Answer

The two important assumptions of portfolio theory are that returns on investments are normally distributed and investors are risk-averse. The other options either miss one of the two assumptions or include irrelevant assumptions.

Two Important Assumptions of Portfolio Theory Are