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Describe the steps to deriving the efficient frontier using: Risky assets only Risky AND Rf asset

Describe the steps to deriving the efficient frontier using:

  1. Risky assets only

  1. Risky AND Rf asset
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Answer #1

While investing it is essential to make a good portfolio. Here the portfolio means invest in different opportunities. there will be riky investments and riskless investments. we can construct an efficient portfolio. Here we can go through the steps in construction of efficient frontier.

The portfolio frontier is the line in the graph which shows the better portfolios with different asset combinations for the investments.

For the construction of a portfolio frontier, we have to assign values for Risks in each investments and create a portfolio.

Then calculate the portfolio expected return and variance.

Then mark the risk and expected return of each portfolio

The efficient frontier shows the portfolios that have maximum returns (expected) at a particular rate of risk

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