An 'efficient' portfolio is one that:
A)combines assets whose returns are not perfectly correlated.
B)offers the highest expected return for a given level of risk.
C)holds a proportion of all possible assets.
D)combines many diverse assets.

Question

Quizplus · Accepted Answer

An efficient portfolio is one that offers the highest expected return for a given level of risk. This means that it is a portfolio that maximizes returns while minimizing risk. A portfolio that combines assets whose returns are not perfectly correlated or diverse assets can be efficient, but this alone does not make it efficient. Holding a proportion of all possible assets does not guarantee efficiency either as it depends on the specific assets and their characteristics.

An 'Efficient' Portfolio Is One That