The most fundamental proposition of modern portfolio theory is that
A) investment risk is reduced by investing in on security.
B) the smaller the standard deviation is, the larger is the risk of a portfolio.
C) even though an asset is risky in isolation, when combined with other assets the risk of the portfolio is less, perhaps even zero.
D) uncertain outcomes make for risky investments.
C
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The marginal principle states that one should
A) increase the level of an activity if the marginal benefit exceeds its marginal cost. B) if possible, pick the level at which the marginal benefit equals the marginal cost. C) decrease the level of an activity if the marginal cost exceeds the marginal benefit. D) all of the above
If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the monetary base is
A) $300 billion. B) $600 billion. C) $333 billion. D) $667 billion.
Which is NOT a function of money?
The interest rate is the ________ cost, hence the ________ cost, of investing in capital
a. actual cost; opportunity cost b. opportunity cost; actual cost c. opportunity cost; marginal cost d. marginal cost; total cost