CFA CFA Level 1 CFA Level 1 Question of the Week – Portfolio Management

CFA Level 1 Question of the Week – Portfolio Management

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    • Matt_AnalystPrep
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      Which of the following statement is least likely accurate regarding the efficient frontier?

      • A. A risk averse investor will only choose portfolios along the efficient
        frontier.
      • B. Portfolios that deliver the greatest return on each level of standard
        deviation make up the efficient frontier.
      • C. The graphic that shows the efficient frontier has the variance on its
        Y-axis.
    • Matt_AnalystPrep
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      The correct answer is C.

      The graphic that demonstrates the efficient frontier has the standard deviation at its X-axis and the return on its Y-axis.

      Option A is a correct statement. Markowitz’s theory relies on the claim that risk-neutral investors tend to seek out portfolios on the efficient frontier. A risk-averse investor will choose a portfolio below the efficient frontier.

      Option B is a correct statement. Portfolios that deliver the greatest return on each level of standard deviation (or risk) make up the efficient frontier.

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