Portfolios composed of the risk-free rate and the tangent portfolio that offer the highest expected rate of return for any given level of risk are best described as super-tangent portfolios.

Question

Quizplus · Accepted Answer

Portfolios composed of the risk-free rate and the tangent portfolio that offer the highest expected rate of return for any given level of risk are best described as lying on the Capital Market Line (CML), not as "super-tangent portfolios." The tangent portfolio itself is the optimal risky portfolio that is tangent to the efficient frontier, and when combined with the risk-free asset, it forms the basis of the CML.

Portfolios Composed of the Risk-Free Rate and the Tangent Portfolio