An efficient portfolio is defined as ________.
A)grouping of assets with same level of risk
B)collection of assets with the aim of maximizing the return for a given risk level
C)an investment in a single asset
D)grouping of assets with the highest possible correlation

Question

Quizplus · Accepted Answer

An efficient portfolio is a collection of assets that aims to maximize the return for a given level of risk. It is achieved through diversification, choosing a combination of assets with low or negative correlations, to reduce the overall risk of the portfolio while maximizing returns. Option A is incorrect because assets with the same level of risk may not necessarily lead to an efficient portfolio. Option C is also incorrect because investing in a single asset does not achieve diversification and may lead to a high level of risk. Option D is incorrect because a portfolio with the highest possible correlation may increase the overall risk of the portfolio.

An Efficient Portfolio Is Defined as ________