Skip to content

CFA Level I · CFA Level I Exam · The Return and Risk of a Financial Portfolio

An investor compares portfolios on the efficient frontier with the global minimum-variance portfolio. Which statement is most accurate?

The efficient frontier consists of the portfolios from the global minimum-variance portfolio upward, each giving the highest expected return for its level of risk. No portfolio has lower risk than the minimum-variance portfolio, and those below it are dominated.

  1. APortfolios on the frontier above the global minimum-variance portfolio offer the highest expected return for each level of riskCorrect
  2. BEvery portfolio on the frontier has lower risk than the global minimum-variance portfolio
  3. CPortfolios below the global minimum-variance portfolio offer higher expected return for each risk level

Explanation

The efficient frontier is the upper portion starting at the global minimum-variance portfolio. No portfolio has lower risk than that one, and portfolios below it are dominated by ones with the same risk and higher return.

Did you get it right without looking?

One question tells you little. A timed set on The Return and Risk of a Financial Portfolio shows your real accuracy, how long you take and where you lose marks.

Practise The Return and Risk of a Financial PortfolioFree diagnostic mock

More The Return and Risk of a Financial Portfolio questions