What does modern portfolio theory try to maximise for a given level of risk?
ADividend payout
BBrokerage income
CExpected return
DTrading volume
Answer & Solution
Correct answer: C. Expected return
The framework assembles assets so that expected return is as high as possible at a chosen risk level.
Keep practising Modern Portfolio Theory
Browse all Modern Portfolio Theory questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Investors who want higher expected returns in MPT must acceptThe risk-free rate is 6%, the market return 12% and a stock has expected return 10% with bWhich statement best describes MPT's idea of diversification?In CAPM, the beta used for pricing mainly capturesThe t-statistic of the Sharpe ratio equals the ratio times the square root ofBerkshire Hathaway's Sharpe ratio for 1976 to 2017 was reported asThe Sharpe ratio can be manipulated when a fund holds illiquid assets because ofThe ex-post Sharpe ratio is computed using