Recommendations & StrategiesQuestion 63 of 100
Modern portfolio theory suggests that the efficient frontier represents portfolios that:
a.Have the lowest possible return
b.Offer the highest expected return for a given level of risk
c.Contain only one asset class
d.Guarantee no losses
Explanation
The efficient frontier plots portfolios offering the maximum expected return for each level of risk, or the minimum risk for a given return. Rational investors select portfolios on this frontier. Combining assets with low correlation shifts the frontier favorably.
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