Which of the following statement(s) is(are) true regarding the selection of a portfolio from those that lie on the capital allocation line?I) Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors.II) More risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors.III) Investors choose the portfolio that maximizes their expected utility.
A) I only
B) II only
C) III only
D) I and III
E) II and III

Question

Quizplus · Accepted Answer

II and III are correct. More risk-averse investors prefer to invest more in the risk-free security and less in the optimal risky portfolio, which is the opposite of what is stated in I. All investors aim to choose the portfolio that maximizes their expected utility, as stated in III.

Which of the Following Statement(s) Is(are) True Regarding the Selection