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If you invest in a portfolio at the bottom of the efficient frontier curve, the portfolio has _______.

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High returns and high risk

High returns and low risk

Low returns and high risk

Low returns and low risk

Low returns and low risk. The bottom of the efficient frontier involves low risk and low return.

The lower the volatility of an investment, the _______ its reward.

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Greater

Lower

Lower. Safe investments do not reward their owners as well as volatile ones do.

If an investor is not afraid of taking risks, he or she is risk-averse.

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True

False

False. Risk-averse people are, to varying extents, wary of risk and do not invite it.

An efficient portfolio is likely to consistently beat the market.

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True

False

False. Efficient portfolios are not likely to beat the market.

Modern Portfolio Theory is based on the assumption that _______.

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Investors like risk

Investors dislike risk

Investors always strive for the highest returns

Investors dislike risk. Modern Portfolio Theory is based on the assumption that investors dislike risk but want the highest return for low levels of risk.

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