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An efficient portfolio seeks the highest return for the________.

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Highest risk

Lowest volatility

Highest volatility

Lowest risk

Lowest volatility. The theory helps you to locate the best-performing set of assets for the lowest amount of volatility.

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.

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.

What assumption does Modern Portfolio Theory make regarding risk?

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Investors welcome risk.

Investors want to avoid unnecessary risk.

Risk is healthy.

Low risk can yield high returns.

Investors want to avoid unnecessary risk. The theory seeks the maximum return on a low level of risk.

An optimal portfolio receives the highest returns on investments with the highest risks.

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True

False

False. An optimal portfolio meets expected returns with the smallest possible risk.

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