Recommendations & StrategiesQuestion 62 of 110
An efficient frontier graph plots portfolios according to which two dimensions?
a.Dividend yield and price-to-earnings ratio
b.Liquidity and tax efficiency
c.Alpha and beta
d.Expected return and risk (standard deviation)
Explanation
The efficient frontier plots portfolios by expected return on one axis and risk, measured by standard deviation, on the other. Portfolios on the frontier offer the maximum return for a given level of risk. Points below the frontier are inefficient because a better trade-off is available.
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