Financial Planner

Answer: D - Investors behaviors impact investment decisions is behavior finance and not capital market theory. Capital market theory has eight assumptions 1) There are not taxes or transaction costs 2)Capital markets are in equilibrium 3)All investors have the same one-period time horizon 4)All investors are Markowitz efficient investors who want to target points on the efficient frontier 5) Investors can borrow and lend any amount of money at the risk-free rate of return 6) All investors have the same homogeneous expectations - they see the same risk/return distribution and cannot buy below the capital market line 7) All investments are infinitely divisible - meaning that it is possible to buy and sell fractional shares of any asset or portfolio 8) The is no inflation and no interest rates changes.