For a Given Standard Deviation, an Efficient Portfolio Will

question 35

Multiple Choice

For a given standard deviation, an efficient portfolio will

• A) minimize the portfolio beta.
• B) minimize the number of securities held in the portfolio.
• C) maximize the expected return.
• D) pinpoint the single best risk-return tradeoff point.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Fixed Cost

Costs that do not vary with the production volume or level of services provided, such as rent, salaries, and insurance.

Salary

Salary refers to a fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee.

Incremental Manufacturing Cost

The additional cost incurred to produce an extra unit of a product, reflecting only those costs that directly change with the level of production.