Question

According to modern portfolio theory, what is the term for a graph that represents optimal portfolios and the trade-off between risk and return?

A) Portfolio spectrum
B) Risk-reward diagram
C) Efficient frontier
D) Risk-return boundary

Answer 1

The term for a graph that represents optimal portfolios and the trade-off between risk and return, according to modern portfolio theory, is Efficient frontier.

Step-by-step explanation:

The term for a graph that represents optimal portfolios and the trade-off between risk and return, according to modern portfolio theory, is Efficient frontier.

The efficient frontier is a curve that shows all the possible portfolios that can be constructed with a given set of assets, while maximizing expected return for a given level of risk or minimizing risk for a given level of expected return. It helps investors understand the relationship between risk and return and find the optimal portfolio that suits their investment goals.