A Portfolio That Belongs to the Markowitz Efficient Set of Portfolios

question 63

Multiple Choice

A portfolio that belongs to the Markowitz efficient set of portfolios will have which one of the following characteristics? Assume the portfolios are comprised of five individual securities.

• A)the lowest return for any given level of risk
• B)the largest number of potential portfolios that can achieve a specific rate of return
• C)the largest number of potential portfolios that can achieve a specific level of risk
• D)a positive rate of return and a zero standard deviation
• E)the lowest risk for any given rate of return

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Definitions:

Equilibrium GDP

Equilibrium GDP, or Gross Domestic Product, is the level of output where aggregate demand equals aggregate supply, resulting in no unintended changes in inventories.

Inflationary Gap

This term reflects the difference between the actual output of an economy and the maximum potential output it could achieve with full employment, often indicating inflation pressures.

Equilibrium GDP

The level of Gross Domestic Product at which the total quantity of goods and services produced equals the total quantity of goods and services purchased.

Deflationary Gap

A condition in which aggregate demand is lower than the aggregate supply potentially leading to deflation.