In theory, which of these is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate?
A) efficient market
B) market portfolio
C) probability distribution
D) stock market bubble

Question

Quizplus · Accepted Answer

The market portfolio is a theoretical bundle of investments that includes every type of asset available in the market, weighted by market value. According to the Capital Asset Pricing Model (CAPM) and modern portfolio theory, the market portfolio is on the efficient frontier, meaning it offers the best possible expected return for its level of risk. It is also on a line tangent from the risk-free rate, known as the capital market line (CML), indicating it is the most efficient portfolio available.

In Theory, Which of These Is a Combination of Securities