An investor will choose to invest in a portfolio on the left portion of the efficient frontier if ______________.
A)They are risk seeking
B)They are risk neutral
C)They are irrational
D)They are risk averse

Question

Quizplus · Accepted Answer

An investor who is risk averse will be willing to invest in a portfolio on the left portion of the efficient frontier as it provides the best risk-reward tradeoff. This is because portfolios on the left side of the efficient frontier offer lower levels of risk (standard deviation) for a given level of return compared to portfolios on the right side of the efficient frontier. Thus, a risk-averse investor can benefit from reduced risks by choosing portfolios on the left side of the efficient frontier.

An Investor Will Choose to Invest in a Portfolio on the Left