- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 52. Portfolio Risk and Return: Part I
- Subject 7. Optimal Portfolio

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**CFA Practice Question**

The optimal portfolio includes all of the following characteristics except which of the following?

A. The optimal portfolio lies at the point of tangency between the efficient frontier and the highest possible utility curve.

B. The optimal portfolio may be different for each investor, but for a given investor it has the highest utility.

C. Utility curves may be different for individual investors even though the optimal portfolio for each investor is presumed to be the same.

**Explanation:**The optimal portfolio varies for each investor depending on the investor’s utility curve. The optimal portfolio occurs at the point of tangency between the efficient frontier and the investor’s highest possible utility curve. However, some risk-averse investors may have a utility curve which demands a lower expected return/lower expected risk tradeoff compared to others.

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**User Contributed Comments**
6

User |
Comment |
---|---|

danlan |
Optimal portfolio can be different for different investor. |

winterSun |
can someone explain this in a little more detail? |

nonsensname |
I understand the last choice as "all investors have the same optimal portfolio". The optimal portfolio of an individual will be determined be specific utility function, so this statement is false. |

kellyyang |
Optimal portfolio should not be same as each investor, it depends. |

aamir1 |
There is optimal (investor) portfolio and optimal risky portfolio. This is talking about optimal portfolio for the investor. |

Steff |
thanks aamir1 |