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Portfolios 503: Modern Portfolio Theory

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1.
If you invest in a portfolio at the bottom of the efficient frontier curve, the portfolio has _______.
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Low returns and low risk. The bottom of the efficient frontier involves low risk and low return.
2.
Modern Portfolio Theory is based on the relationship between risk and volatility.
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False. Modern Portfolio Theory is based on the relationship between risk and reward.
3.
An efficient portfolio is likely to consistently beat the market.
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False. Efficient portfolios are not likely to beat the market.
4.
Efficient portfolios achieve low volatility by _______.
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Asset allocation. Efficient portfolios achieve low volatility by diversifying.
5.
An efficient portfolio seeks the highest return for the________.
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Lowest volatility. The theory helps you to locate the best-performing set of assets for the lowest amount of volatility.