The individual investor's optimal portfolio is designated by
A) the point of tangency with the indifference curve and the capital allocation line.
B) the point of highest reward to variability ratio in the opportunity set.
C) the point of tangency with the opportunity set and the capital allocation line.
D) the point of the highest reward to variability ratio in the indifference curve.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The optimal portfolio for an individual investor is determined by the point where their highest indifference curve is tangent to the capital allocation line, indicating the best trade-off between risk and return according to their preferences.

The Individual Investor's Optimal Portfolio Is Designated by