Given the capital allocation line,an investor's optimal portfolio is the portfolio that
A)maximizes her expected profit.
B)maximizes her risk.
C)minimizes both her risk and return.
D)maximizes her expected utility.
E)none of the above.

Question

Quizplus · Accepted Answer

An investor's optimal portfolio on the capital allocation line is the point where the tangent line from the risk-free rate to the capital market line intersects the capital allocation line. This point represents the portfolio with the highest expected utility, which is a measure of the investor's satisfaction or happiness with the potential outcomes of the portfolio. Therefore, the correct choice is D, which says that the optimal portfolio maximizes the investor's expected utility.

Given the Capital Allocation Line,an Investor's Optimal Portfolio Is the Portfolio