Question

Which of the following statement(s) is / are inaccurate? The efficient frontier is the set of all attainable risky assets with the:

A. highest expected return for a given level of risk.

B. lowest amount of risk for a given level of return.

C. highest expected return relative to the risk-free rate.

D. all of the above options are inaccurate.

Answer 1

Answer-

The correct answer is C. It is inaccurate
At the efficient frontier for the risky assets the one cannot acheive highest expected return relative to the risk-free rate.

In the efficient frontier every asset below the global minimum variance frontier shouldn’t be considered as part of the efficient frontier as the rational investor wouldn’t invest in them.

The Options A and B are accurate. The efficient frontier for risky assets will have highest expected return for a given level of risk and lowest amount of risk for a given level of return.