Which statement about the use of the profile model is best?
A)The profile model requires careful calculation of the percentage risk for each possible project.
B)The scale used for the profile model can be any two numerical variables that a company deems important.
C)The efficient frontier in the profile model is where return is 100% (or greater)and risk is 0%.
D)For a given level of risk,a positive move on the return axes would indicate a superior project.

Question

Quizplus · Accepted Answer

Option D correctly explains how the profile model is used. It involves plotting projects on a graph with risk on the x-axis and return on the y-axis. For a given level of risk, a positive move on the return axes would indicate a superior project. The efficient frontier is the set of projects that offer the greatest return for a given level of risk, and it is not necessarily at a maximum return of 100%. Options A and B are incorrect, as the profile model does not require calculating percentage risks, and the scale used for the model is limited to two numerical variables that represent risk and return. Option C is also incorrect, as it makes an incorrect statement about the efficient frontier.

Which Statement About the Use of the Profile Model Is