A portfolio is considered to be efficient if:
A) No other portfolio offers higher expected returns with the same risk.
B) No other portfolio offers lower risk with the same expected return.
C) There is no portfolio with a higher return.
D) Choices a and b
E) All of the above

Question

Quizplus · Accepted Answer

An efficient portfolio is one that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return. Therefore, it satisfies both options a and b in the question. Option c is not necessarily true as there could be another portfolio with a higher return but with higher risk.

A Portfolio Is Considered to Be Efficient If