Which one of the following statements about efficient portfolios is correct?
A)Any efficient portfolio will lie below the minimum variance portfolio when the expected portfolio return is plotted against the portfolio standard deviation.
B)An efficient portfolio will have the lowest standard deviation of any portfolio consisting of the same two securities.
C)There are multiple efficient portfolios that can be constructed using the same two securities.
D)Any portfolio mix consisting of only two securities will be an efficient portfolio.
E)There is only one efficient portfolio that can be constructed using two securities.

Question

Quizplus · Accepted Answer

Efficient portfolios are those portfolios that provide 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. There can be multiple efficient portfolios that can be constructed using the same two securities, because the efficient frontier (which represents all efficient portfolios) is typically curved and not a straight line. Therefore, choice A, B, D, and E are incorrect statements about efficient portfolios.

Which One of the Following Statements About Efficient Portfolios Is