Modern Portfolio Theory: Introduction and Fundamentals
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What is the focus of the Modern Portfolio Theory (MPT)?

  • Minimizing financial uncertainty in investment choices
  • Understanding the fundamentals of consumption baskets of goods
  • Maximizing the income levels of alternative investments
  • Optimal decision of an investor for resource allocation in a portfolio (correct)

    • In Choice Theory Under Uncertainty, what are the objects of choice?

  • The probability of different states
  • Consumption baskets of goods
  • Alternative investments leading to different possible income levels (correct)
  • The level of utility provided by asset payoffs

    • What are the two key ingredients in determining which investment alternative is better according to Investor preferences?

  • Current price of the assets and the probability of different states
  • Probability of the two states and the ex post level of utility provided by the asset payoffs (correct)
  • The probability of the two states and the current price of the assets
  • Ex ante level of utility provided by the asset payoffs and the probability of different states

    • Who pioneered the Modern Portfolio Theory?

    <p>Harry Markowitz</p> Signup and view all the answers

    What is embedded in the framework of Modern Portfolio Theory?

    <p>The optimal portfolio choice</p> Signup and view all the answers

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