The efficient frontier is best described as the set of portfolios that:
A) represents the relation between expected returns on stocks and the market return.
B) dominate all other portfolios of risky assets in terms of expected return and risk.
C) dominate all other portfolios of risky and risk-free assets in terms of expected return and risk.

Question

Quizplus · Accepted Answer

The efficient frontier represents the 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, among portfolios of risky assets. It does not include risk-free assets; those are considered when constructing the Capital Market Line.

The Efficient Frontier Is Best Described as the Set of Portfolios