From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:
A) is the top point.
B) is the point closest to the vertical axis.
C) is the point halfway between the two end points.
D) cannot be determined since firms vary in their willingness to accept risk.

Question

​From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:
A) ​is the top point.
B) ​is the point closest to the vertical axis.
C) ​is the point halfway between the two end points.
D) ​cannot be determined since firms vary in their willingness to accept risk.

Quizplus · Accepted Answer

The optimal point on an efficient frontier varies for each firm because it depends on the firm's specific risk tolerance and investment goals. The efficient frontier represents a set of portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given level of expected return. Since firms have different preferences and strategies regarding risk and return, there is no single point on the frontier that is optimal for all firms.

​From the Concept of an "Efficient Frontier," the Point on a Frontier

From the Concept of an "Efficient Frontier," the Point on a Frontier