Which of the Following Portfolios Could Not Possibly Be Located

question 31

Multiple Choice

Which of the following portfolios could not possibly be located on the efficient frontier of risky portfolios?

• A)Portfolio 1 with an expected return of 6% and a standard deviation of 6%.
• B)Portfolio 2 with an expected return of 10% and a standard deviation of 12%.
• C)Portfolio 3 with an expected return of 10% and a standard deviation of 8%.
• D)Portfolio 4 with an expected return of 12% and a standard deviation of 20%.

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Definitions:

Required Rate

Often used in reference to the minimum acceptable return on investment or the minimum discount rate used in net present value calculations.

Internal Rate of Return

A metric used in financial analysis to estimate the profitability of potential investments, calculated as the rate of return that makes the net present value of all cash flows from a particular project equal to zero.

Initial Investment

The amount of money used to start a project, purchase an asset, or initiate operations.

Cash Inflows

Money or funds entering a business from various sources like sales, investments, or financing.