Given the capital allocation line,an investor's optimal portfolio is the portfolio that
A) maximizes her expected profit.
B) maximizes her risk.
C) minimizes both her risk and return.
D) maximizes her expected utility.
E) none of these.

Question

Quizplus · Accepted Answer

The optimal portfolio for an investor is the portfolio that maximizes their expected utility. The capital allocation line represents a combination of risk-free and risky assets. The point where the investor's indifference curve is tangent to the capital allocation line represents the optimal portfolio for the investor. This point maximizes the investor's expected utility, which takes into account the trade-off between risk and expected return. Therefore, the correct answer is D) maximizes her expected utility.

Given the Capital Allocation Line,an Investor's Optimal Portfolio Is the Portfolio