The condition for optimal portfolio choice can be represented by:
A) $E \left[ U ^ { \prime } / \left( 1 + r _ { f } \right) \right] = 0$ .
B) $E \left[ U ^ { \prime } \left( r - r _ { f } \right) \right] = 0$ .
C) $E \left[ U ^ { \prime } r / \left( 1 + r _ { f } \right) \right] = 0$ .
D) $E \left[ U ^ { \prime } ( 1 + r ) \right] = 0$ .

Question

Quizplus · Accepted Answer

The condition for optimal portfolio choice involves setting the expected marginal utility of excess returns (returns above the risk-free rate) to zero.

The Condition for Optimal Portfolio Choice Can Be Represented By E[U′/(1+rf)]=0E \left[ U ^ { \prime } / \left( 1 + r _ { f } \right) \right] = 0E[U′/(1+rf​)]=0

The Condition for Optimal Portfolio Choice Can Be Represented By $E \left[ U ^ { \prime } / \left( 1 + r _ { f } \right) \right] = 0$