The efficient set theorem states that an investor will choose an optimal portfolio from the set of portfolios that offers the following two conditions:
A) minimum expected returns for varying levels of risk and minimum risk for varying levels of expected returns
B) maximum expected returns for varying levels of risk and minimum risk for varying levels of expected returns
C) the same expected returns for varying levels of risk
D) maximum expected returns at the same levels of risk and minimum risk for varying levels of expected returns

Question

Quizplus · Accepted Answer

The efficient set theorem aims to find the optimal portfolio with the maximum expected returns for varying levels of risk and minimum risk for varying levels of expected returns. Option B best describes this objective. Option A describes the opposite of the efficient set theorem, Option C is not considering risk, and Option D only considers maximum expected returns while ignoring risk.

The Efficient Set Theorem States That an Investor Will Choose