Which of the following is true regarding a cutoff rate?

Choose the closest answer:

a. The cutoff rate is be determined by dividing the Beta with the difference between average return and return on the risk-free rate of the securities.

b. All securities whose return is above the cutoff rate are selected in the market portfolio.

c. The cutoff rate is computed from the characteristics of all securities in the optimum portfolio.

d. All securities whose risk is below the cutoff rate are selected in the optimum portfolio.