Optimal Portfolio

A rational investor seeks an efficient portfolio tangent to the highest attainable indifference curve. It may be noted that the shape of the indifference curve may be linear or curvilinear. The point of tangency between the efficient frontier and risk- return indifference curve corresponds to the optimal portfolio for the concerned investor. Indifference curve IC, is tangent to the efficient frontier at point P, which represents the optimal portfolio.

Optimal Portfolio

Optimal Portfolio

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