Under Markowitz's theory, the ideal portfolio for an investor is represented by:
A)the point of tangency between the efficient frontier and the investor's indifference curve.
B)the highest possible indifference curve.
C)the highest possible point on the efficient frontier.
D)None of the above

Question

Quizplus · Accepted Answer

According to Markowitz's theory, the ideal portfolio for an investor is the one that lies at the point of tangency between the efficient frontier (which represents the highest level of expected return for a given level of risk) and the investor's indifference curve (which represents the level of risk the investor is willing to take on for a given level of expected return). This point of tangency represents the optimal combination of risk and return for the investor. Therefore, option A is the correct answer. Options B and C are incorrect because they do not take into account the investor's willingness to bear risk. Option D is incorrect because one of the other options is correct.

Under Markowitz's Theory, the Ideal Portfolio for an Investor Is