PFMP · Question #95
The above figure shows the efficient frontier of a portfolio. Which point has the best possible expected level of return for its level of risk?
The correct answer is B. B. The efficient frontier represents the set of optimal portfolios that offer the maximum expected return for a given level of risk. A point ON the efficient frontier is considered optimal. Point B lies directly on the efficient frontier curve, meaning it achieves the highest…
Question
The above figure shows the efficient frontier of a portfolio. Which point has the best possible expected level of return for its level of risk?
Options
- AA
- BB
- CC
- DNone of the above
How the community answered
(35 responses)- A3% (1)
- B86% (30)
- C3% (1)
- D9% (3)
Explanation
The efficient frontier represents the set of optimal portfolios that offer the maximum expected return for a given level of risk. A point ON the efficient frontier is considered optimal. Point B lies directly on the efficient frontier curve, meaning it achieves the highest achievable return for its specific risk level. Point A typically falls below the frontier (suboptimal - achievable but not maximizing return), and Point C typically lies above the frontier (unachievable given real-world constraints). Therefore, B represents the best risk-return balance among the given options.
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