Which of the following statement(s) is(are) false 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 II
E) I and III

Question

Quizplus · Accepted Answer

I is false because less risk-averse investors will actually invest more in the optimal risky portfolio and less in the risk-free security, which is the opposite of what is stated. II is true as it correctly describes the behavior of more risk-averse investors. III is also true as it correctly states that investors choose portfolios that maximize their expected utility.

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