The efficient frontier of risky assets is
A)the portion of the investment opportunity set that lies above the global minimum variance portfolio.
B)the portion of the investment opportunity set that represents the highest standard deviations.
C)the portion of the investment opportunity set which includes the portfolios with the lowest standard deviation.
D)the set of portfolios that have zero standard deviation.
E)both A and B are true.

Question

Quizplus · Accepted Answer

The efficient frontier of risky assets refers to the portion of the investment opportunity set that lies above the global minimum variance portfolio. This means that it includes all portfolios that provide the highest expected return for a given level of risk or the lowest risk for a given level of expected return. Therefore, option A is correct. Option B is incorrect because the efficient frontier does not represent the highest standard deviations but rather the set of portfolios that are optimal in terms of risk and return trade-offs. Option C is incorrect as it mentions the portfolios with the lowest standard deviation which are not necessarily part of the efficient frontier. Option D is incorrect as there are no portfolios with zero standard deviation. Option E is incorrect because only option A is true.

The Efficient Frontier of Risky Assets Is