12-29 Any model that seeks to estimate an efficient frontier for loans,and thus the optimal proportions in which to hold loans made to different borrowers,needs to determine and measure the

Question

Quizplus · Accepted Answer

In order to estimate an efficient frontier and determine optimal proportions for loans made to different borrowers, all of the factors listed (expected return, risk, correlation of default risks, and expected return of the entire portfolio) must be considered and measured. Therefore, the correct answer is E, "All of the above."

12-29 Any Model That Seeks to Estimate an Efficient Frontier