Which of the following makes this a true statement: The shape of the efficient frontier implies that
A) diminishing returns apply to risk-taking in the investment world.
B) increasing returns apply to risk-taking in the investment world.
C) returns are not impacted by risk-taking in the investment world.
D) None of these choices complete the sentence to make it true.

Question

Quizplus · Accepted Answer

The shape of the efficient frontier in portfolio theory illustrates the concept of diminishing returns to risk-taking. As an investor moves up the efficient frontier by taking on more risk, the incremental return for each unit of additional risk taken decreases. This reflects the principle of diminishing marginal returns in the context of investment risk and return.

Which of the Following Makes This a True Statement: the Shape