Which of the following is false regarding the efficient frontier?
A) A stock that lies above the efficient frontier is overvalued.
B) The efficient frontier includes stocks, bonds, and all other assets.
C) The efficient frontier may include individual stocks as well as portfolios.
D) A bond can lie on the efficient frontier.
E) All of the above are true.

Question

Quizplus · Accepted Answer

The statement "A stock that lies above the efficient frontier is overvalued" is false. A stock that lies above the efficient frontier is considered to have a higher return for a given level of risk compared to other assets on the efficient frontier. This means it could be undervalued, appropriately valued, or overvalued depending on the investor's specific risk and return preferences.

Which of the Following Is False Regarding the Efficient Frontier