Which One of the Following Portfolios Cannot Lie on the Efficient

question 37

Multiple Choice

Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz? $\begin{array}{ccc}\underline{\text { Portfolio }} &\underline{ \text { Expected Return} } & \underline{\text { Standard Deviation} } \\ \mathrm{W} & 9 \% & 21 \% \\\mathrm{X} & 5 \% & 7 \% \\\mathrm{Y} & 15 \% & 36 \% \\\mathrm{Z} & 12\%& 15 \%\end{array}$

• A)Only portfolio W cannot lie on the efficient frontier.
• B)Only portfolio X cannot lie on the efficient frontier.
• C)Only portfolio Y cannot lie on the efficient frontier.
• D)Only portfolio Z cannot lie on the efficient frontier.
• E)Cannot tell from the information given.

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Definitions:

Profit Maximizing

A strategy or point at which a business achieves the highest level of profit possible with the given resources and market conditions.

Parallel Conduct

Form of implicit collusion in which one firm consistently follows actions of another.

Implicit Collusion

An understanding or arrangement among competitors where they cooperate indirectly by making similar business decisions without explicit agreement.

Cartel Activities

Actions taken by a group of independent market participants who collude to raise prices, limit supply, or control markets in some other way.