CFA Level 1
Portfolio Management

Understanding Modern Portfolio Theory

Easy Portfolio Risk And Return Modern Portfolio Theory

Modern Portfolio Theory (MPT) is a foundational concept in portfolio management that emphasizes the importance of diversification. According to MPT, an investor can optimize their portfolio to maximize returns for a given level of risk by selecting a mix of assets that are not perfectly correlated. In this context, which of the following statements accurately reflects a principle of Modern Portfolio Theory?

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