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How do you create portfolio with maximum return given a defined level of risk?

How do you create portfolio with maximum return given a defined level of risk?

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Answer #1

A portfolio can created with maximum return by choosing portfolio on efficient frontier line. It provides set of portfolios which provide maximum return for a given level of Expected Return. Higher return portfolio has very low correlation between the different securities and higher diversification. The efficient portfolio line can be created by plotting between expected return and the risk involved.

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