Question

The efficient frontier of risky assets is

i) the portion of the investment opportunity set that lies above the global minimum variance portfolio.

ii) the portion of the investment opportunity set that represents the highest standard deviations.

iii) the portion of the investment opportunity set which includes the portfolios with the lowest standard deviation.

iv) the set of portfolios that have zero standard deviation.

Group of answer choices

(i)

(iv)

(ii)

(i) and (ii) are true.

(iii)

Answer #1

Portfolios on the efficient Frontier are those providing the greatest expected return for a given amount of risk. Those portfolio who are lying above global minimum variance portfolio are only fulfilling this criteria. Hence, Efficient Frontier of risky assets will be the proportion of the investment opportunities set that lies above the global minimum variance portfolio.

All the other statements are false.

Correct answer will be option (i)the portion of the investment opportunity set that lies above the global minimum variance portfolio.

Adding additional risky assets to the investment opportunity set
will generally move the efficient frontier ________ and to the
________.A) up; rightB) up; leftC) down; rightD) down; left

Which of the following statements regarding a portfolio of two
risky assets (with almost equal weights) is true?
A.
For this portfolio, if investors do not invest in a risk-free
asset, the feasible set simply includes the upward curve starting
from the global minimum variance portfolio.
B.
A portfolio without a risk-free asset cannot earn a higher
return than a portfolio with risk-free assets if these two
portfolios have the same risk.
C.
If investors invest in a risk-free asset,...

18. Which of the following statements about the minimum variance
portfolio of all risky securities are valid? (Assume short sales
are allowed.)
i. Its variance must be lower than those of all other securities
or portfolios.
ii. Its expected return can be lower than the risk-free
rate.
iii. It may be the optimal risky portfolio.
iv. It must include all individual securities.
19. Assume that expected returns and standard deviations for all
securities (including the risk-free rate for borrowing and...

(i)
The expected returns on two distinct
risky assets A and B are correlated and a portfolio consisting of A
and B has zero variance of expected return. What can be said about
the correlation between the expected returns of risky assets A and
B?
(ii)
An investor constructs an efficient
portfolio that invests 150% of his investment in the tangent
portfolio of risky asset and is short in the risky free asset for
the rest. What can be said...

There are three distinct frontier
portfolios, A, B and C.
Portfolio
Expected Returns
Standard Deviation
A
0.4
0.40
B
0.2
0.30
C
0.3
0.25
Compute, ρAB, the correlation between frontier
portfolios A and B.
Calculate the expected return on the global minimum variance
portfolio.
Calculate the maximum possible Sharpe Ratio from these frontier
portfolios, when the risk free rate is 2% per annum.
d. Explain, illustrating with graphs, the difference between the
portfolio frontier when there is a risk free...

3.
a)
When adding a risky asset to a portfolio of many risky assets,
which property of the asset
is more important, its standard deviation or its covariance with
the other assets? Explain.
b)
Suppose that the risky premium on the market portfolio is estimated
at 8% with a standard deviation of 22%. What is the risk premium of
a portfolio invested 25% in CEMENCO and 75% in Monrovia Breweries,
if they have Betas of 1.1 and 1.25...

A Portfolio consists of seven investment products. The expected
return of each investment, in million GPB, is normally distributed
as follows: Investment I ~ N(70, 16); Investment II ~ N(40, 25);
Investment III ~ N(60, 9); Investment IV ~ N(20, 4); Investment V ~
N(20, 16); Investment VI ~ N(30, 9); Investment VI ~ N(10, 4); The
returns from the seven investments are independent.
Find the distribution of the total Portfolio return. Report the
mean, the variance and the standard...

Consider the following statistics of
the returns of Stock A, Stock B and the market (m):
sA =
0.20 corrA,m = 0.4
sB =
0.30 corrB,m = 0.7
sm = 0.15
E(rm) = 0.10
Suppose further that the risk-free
rate is 5%.
(a) According to the Capital Asset Pricing Model, what
should be the expected return of Stock A and of
Stock B? [Hint: This is an open-book
exam.]
(b) Suppose that the correlation between the...

i. A researcher estimated the proportion of voters who favor the
Democratic candidate in an election. Based on 500 people she
calculates the 95% confidence interval for the population
proportion p: 0.123 <p<0.181.
Which of the following is a valid interpretation of this
confidence interval ?______
a. There is a 95% chance that the true value of p lies between
0.123 and 0.181
b. If many different samples of 500 were selected
and a confidence interval was constructed based on...

Holding period and annual? (investment) returns. Baker Baseball?
Cards, Inc. originally purchased the rookie card of? Hammerin' Hank
Aaron for $ 33.00. After holding the card for 4 years, Baker
Baseball Cards auctioned the card for $132.00. What are the holding
period return and the simple annual return on this? investment?
Investment
Original Cost
of Investment
Selling Price of Investment
Distributions
Received
Percent Return
+
+
??CD
? $500
?$540
?$0
??
??Stock
?$23
?$34
?$2
??
??Bond
?$1,040
?$980...

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