Which of the following statements is false? A)Thetangentportfolioisefficientandt

Question

Which of the following statements is false?

A)Thetangentportfolioisefficientandthat,onceweincludetherisk-freeinvestment, all efficient portfolios are combinations of the risk-free investment andthe tangent portfolio.

B) The optimal portfolio of risky investments depends on how conservative oraggressive the investor is.

C) By combining the efficient portfolio with the risk-free investment, an investor willearn the highest possible expected return for any level of volatility he or she is willingto bear.

D) The efficient portfolio is the tangent portfolio, the portfolio with the highest Sharpe ratio in the economy

Explanation / Answer

An optimal portfolio is constructed by risk-return trade offs. Risk and return are the elements of analysis of an optimal portfolio. The conservatism or aggresiveness of an investor is irrelevant while determining the optimal portfolio. Thus, the false option is Option B, The optimal portfolio of risky investments depends on how conservative or aggressive the investor is.

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