The optimal portfolio is designated by
A) the point of tangency between the efficient set and the investor's indifference curve
B) the point of highest indifference curve and its tangency to the feasible set
C) the point of tangency with the opportunity set and the security market line
D) the point of tangency between the efficient and the feasible set

Question

Quizplus · Accepted Answer

The optimal portfolio is the point where the investor's indifference curve is tangent to the efficient frontier. This point represents the portfolio with the highest level of expected return for a given level of risk, or the lowest level of risk for a given level of expected return. This point is also known as the tangency portfolio or the optimal risky portfolio.

The Optimal Portfolio Is Designated by