Answer (D) is correct . An investor wants to maximize expected return and minimize risk when choosing a portfolio. A feasible portfolio that offers the highest expected return for a given risk or the least risk for a given expected return is an efficient portfolio. A portfolio that is selected from the efficient set of portfolios because it is tangent to the investor’s highest indifference curve is the optimal portfolio.
Answer (A) is incorrect because A portfolio is efficient if it offers the highest return for a given risk or the least risk for a given return.
Answer (B) is incorrect because The optimal portfolio is tangent to the investor’s highest indifference curve. Thus, it is the efficient portfolio with the highest utility.
Answer (C) is incorrect because The optimal portfolio is efficient as well as feasible.
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