The Optimal Portfolio Is Identified at the Point of Tangency

question 112

Multiple Choice

The optimal portfolio is identified at the point of tangency between the efficient frontier and the

• A) highest possible utility curve.
• B) lowest possible utility curve.
• C) middle range utility curve.
• D) steepest utility curve.
• E) flattest utility curve.

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Definitions:

Standard Error

The standard deviation of the sampling distribution of a statistic, typically the mean.

Dependent Variable

A variable in an experiment or study whose changes are subject to the variations in other variables (independent variables).

Predicted Values

The values estimated based on a statistical model that represents the expected outcome for a given set of input variables.

Least Squares Line

A straight line that best fits the data points on a scatter plot, minimizing the sum of the squares of the vertical distances of the points from the line.