Question

The range of risk-return combinations possible with a portfolio of securities is captured by the opportunity set, which is also known as the ______ set.

a) Efficient
b) Feasible
c) Optimal
d) Tangent

Answer 1

The range of risk-return combinations possible with a portfolio of securities is captured by the opportunity set, which is also known as the Efficient set.

Step-by-step explanation:

The range of risk-return combinations possible with a portfolio of securities is captured by the opportunity set, which is also known as the Efficient set.

The Efficient set represents the combination of securities that maximizes returns for a given level of risk or minimizes risk for a given level of returns. It includes all the portfolios that cannot be improved upon in terms of risk and return.

For example, if we plot the expected returns and standard deviations of different portfolios on a graph, the Efficient set would be the curve that represents the highest returns for each level of risk, or the lowest risk for each level of returns.