Final answer:
An efficient portfolio offers both the highest expected return for a given level of risk and the least risk for a given level of expected return, balancing the tradeoff of risk and reward which is central to investment choices.
Step-by-step explanation:
An efficient portfolio is defined as one which provides the highest expected return for a given level of risk, and conversely, offers the lowest risk for a given level of expected return. This dual characteristic is what distinguishes efficient portfolios from other types of investment options. On the spectrum of household investment choices, bank accounts represent very low risk and returns, bonds possess higher risk with higher returns, and stocks are considered the riskiest but with the highest potential returns.
These investment choices illustrate a tradeoff, indicating that investors require higher returns to compensate for taking on additional risk. It is understood that if risky assets like stocks did not offer higher average returns, they would not be as attractive to investors. Therefore, the correct answer to the question is 'a. provides the highest expected return for a given level of risk and provides the least risk for a given level of expected return.'