Question

What trade-off does investing entail according to Modern Portfolio Theory?

a.

Between risk and expected return

b.

Between short-term and long-term investments

c.

Between liquidity and solvency

d.

Between asset classes and industry sectors

Answer: (a).Between risk and expected return Explanation:According to Modern Portfolio Theory (MPT), investing involves a trade-off between risk and expected return. Assets with higher expected returns typically carry higher levels of risk, and investors must balance their risk tolerance with their desire for potential returns when constructing investment portfolios. MPT aims to optimize this trade-off by diversifying portfolios across assets with different risk-return profiles.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. What trade-off does investing entail according to Modern Portfolio Theory?

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What does Modern Portfolio Theory (MPT) primarily aim to achieve?

Q. What is asset-liability management (ALM) primarily concerned with?

Q. According to the Indian Regulations outlined, what is the minimum percentage requirement for investments in Central Government Securities?

Q. What is the minimum percentage requirement for investments in Government securities and other Guaranteed securities, including Central Government Securities?

Q. Which of the following statements regarding insurance accounting is NOT correct?

Q. What are the three exceptions in general accounting standards for insurers carrying on general insurance business?

Q. How should premium be recognized as income?

Q. When should premium reserve for unexpired risks be created?

Q. How should acquisition costs be accounted for?

Q. What does the liability for outstanding claims include?

Q. What should the accounting estimates for claims cost include?

Q. How are loans typically measured?

Q. When should a Catastrophe Reserve be created?

Q. Which of the following are important accounting functions in a general insurance company?

Q. Why is accurate claims reserving crucial for insurers?

Q. Who are the stakeholders with varied interests in insurance reserving?

Q. What are the two main sets of reserves in insurance?

Q. At what level is the process of claims reserving carried out?

Q. Which two basic investment theories do insurance companies typically follow?

Q. How does Insurance Accounting differ from accounting in other industries?

Recommended Subjects

Are you eager to expand your knowledge beyond IC 14 Regulations of Insurance Business? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!