Which of the following is a TRUE statement?
A)The tangent portfolio is the risky portfolio on the efficient frontier whose tangent line cuts the horizontal axis at the risk-free rate.
B)The new (or super)efficient frontier represents the portfolios composed of the risk-free rate and the tangent portfolio that offers the highest expected rate of return for any given level or risk.
C)The separation theorem states that the investment decision, (how to construct the portfolio of risky assets), is not separate from the financing decision, (how much should be invested or borrowed in the risk-free asset).
D)The market portfolio is a portfolio that contains some risky securities in the market.

Question

Quizplus · Accepted Answer

The new (or super) efficient frontier represents the combination of the risk-free asset and the tangent portfolio, offering the highest expected return for a given level of risk. This concept is a key component of the Capital Asset Pricing Model (CAPM) and modern portfolio theory, illustrating how investors can achieve optimal risk-return trade-offs by combining a risk-free asset with a portfolio of risky assets.

Which of the Following Is a TRUE Statement