A portfolio optimization model used to construct a portfolio that minimizes risk subject to a constraint requiring a minimum level of return is known as a. the Hauck maximum variance portfolio model. b. a capital budgeting pricing model. c. the Markowitz mean-variance portfolio model. d. a market share optimization model.

C. The Markowitz mean-variance portfolio model.

Explanation:

This theory was developed by Harry Markowitz; and it is also known as Modern Portfolio Theory (MPT) according to which we can balance our investment by combining different securities, illustrating how well selected shares portfolio can result in maximum profit with minimum risk. He proved that investors who take a higher risk can also achieve higher profit. The central measure of success or failure is the relative portfolio gain, i. e. gain compared to the selected benchmark.

C. the Markowitz mean-variance portfolio model. d. a market share optimization

Explanation:

Modern portfolio theory (MPT) was propounded by Harry Markowitz in his paper "Portfolio Selection," published in 1952 by the Journal of Finance. It is a theory that argues that an investment's risk and return characteristics should not be viewed alone, but should be evaluated by how the investment affects the overall portfolio's risk and return.

The theory states that investors are mainly concerned with two properties of an asset which are:

• Risk

• Return

Assumptions of the model

1. The investors risk estimates are proportional to the variance of return they perceive for a security or portfolio.

2. Investors base their investment decisions on two criterias: expected return and variance of return.

3. Investors are risk averse.

4. Investors are rational.

5. The return on an investment adequately summarizes the outcome of the investment.