Which of the following is a TRUE statement of modern portfolio theory?
A)It states that securities should be managed within a portfolio, rather than individually, to lower risk-reduction gains.
B)It stipulates that investors should diversify their investments so as to be unnecessarily exposed to a single negative event.
C)It shows how to form portfolios with the highest possible expected rate of return for any given level of risk.
D)It demonstrates that by combining securities into portfolios, we can increase risk.

Question

Quizplus · Accepted Answer

Modern portfolio theory shows how to form portfolios with the highest possible expected rate of return for any given level of risk. It emphasizes diversification to lower risk, rather than increasing risk through combining securities into portfolios.

Which of the Following Is a TRUE Statement of Modern