- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 1. Portfolio Risk and Return: Part I
- Subject 5. Efficient Frontier
CFA Practice Question
Investors seeking the highest possible return-to-risk tradeoff will hold the ______.
B. efficient portfolio with the highest return
C. efficient portfolio with the lowest return
A. lowest-risk portfolio possible
B. efficient portfolio with the highest return
C. efficient portfolio with the lowest return
Correct Answer: A
The return-to-risk tradeoff is represented by the slope of the efficient frontier and is different for each point. At the minimum-risk point, the slope of the efficient frontier is infinite. Moving up the efficient frontier reduces the return-to-risk tradeoff.
User Contributed Comments 8
| User | Comment |
|---|---|
| aartis | Highest risk return trade off - Lowest risk portfolio |
| achu | Good question. |
| Vadik | Yeah, Good one |
| ravdo | suuuuuch a good question!!! |
| BigJimStud | Excellent question. |
| Allen88 | muy bueno question! |
| endurance | estrema domanda eccellente !! |
| Shaan23 | Whats odd. When you read in depth this answer seems it should include A as well In the text it says the efficient frontier is the line above the Global minumum variance portfolio(Just the top half of the efficient curve) by that definition that would include answer A(where the E(retun) is minimum |