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Answer the following a. State the hypothesis of the Theory of Portfolio Choice. b. State the...

Answer the following
a. State the hypothesis of the Theory of Portfolio Choice.
b. State the theory of supply and demand in the bond market.

Solutions

Expert Solution

A. Hypothesis of the theory of portfolio choice is focused upon selecting upon those portfolio the which are giving the maximum rate of return and which are having the minimum risk associated with the portfolio so and investor would be more inclined to take less risk and he would be inclined to make more rewards.

So, the hypothesis of theory of portfolio choice will be selection of an investor which is based upon the optimisation of the risk and maximization of the return. It is basically the modern portfolio theory

B. Theory of supply and demand in the bond market reflects that changes in demand curve and supply curve of the bond Markets and the demand curve the bond markets will be frequently shifting due to changes in the pattern of the wealth, expected return, expected risk.

Changes in the supply curve will always be dependent upon government expenditures inflationary conditions for changes in the business related specific factors.

There is always a focus in attaining equilibrium between the demand and the supply curve..

jeff jeffy answered 1 year ago
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