Question

Explain optimal risky portfolio and draw the graph

Explain optimal risky portfolio and draw the graph

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer-

Optimal Risky Portfolio

The optimal risky portfolio is found at the intersection point where the Capital Allocation Line (CAL) is tangent to the efficient frontier. This asset weight combination gives the best risk-to-reward ratio, as it has the highest slope for CAL.

The y-axis is Expected returns and the x-axis is Standard deviation or risk.


0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Draw the figure of determination of the optimal overall portfolio and explain
Draw the figure of determination of the optimal overall portfolio and explain
What is the standard deviation of the optimal risky portfolio?
What is the standard deviation of the optimal risky portfolio?
True/False. The optimal combination of risky assets corresponds to the point of tangency between a graph...
True/False. The optimal combination of risky assets corresponds to the point of tangency between a graph of all efficient portfolio combinations of two assets and a line which begins at the risk-free rate along the y-axis of the graph.
The optimal risky portfolio offers an expected return of 12.8% and a standard seviation of 13.79%....
The optimal risky portfolio offers an expected return of 12.8% and a standard seviation of 13.79%. Emily has a risk aversion of 7. The risk free rate is 4%. How much should she allocate to risk free asset? 62% 66% 45% 34%
Your optimal risky portfolio formed with the two stocks above (A and B) has an expected...
Your optimal risky portfolio formed with the two stocks above (A and B) has an expected return of 19% and a standard derivation of 32%. The risk-free rate is 4% and you have a risk-aversion parameter of 3. What is the proportion of your investment in A, B and the risk-free asset, respectively, in your final portfolio?
Risky Asset A and Risky Asset B are combined so that the new portfolio consists of...
Risky Asset A and Risky Asset B are combined so that the new portfolio consists of 70% Risky Asset A and 30% Risky Asset B.  If the expected return and standard deviation of Asset A are 0.08 and 0.16, respectively, and the expected return and standard deviation of Asset B are 0.10 and 0.20, respectively, and the correlation coefficient between the two is 0.25: (13 pts.) What is the expected return of the new portfolio consisting of Assets A & B...
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has...
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has an expected return of 13% and a standard deviation of 20%. Gamiori has an expected return of 6% and a standard deviation of 10%. The correlation coefficient between the returns of Origami and Gamiori is 0.30. The risk-free rate of return is 4%. What is the portfolio weight of Origami in the optimal risky portfolio?
2. An investor can design a risky portfolio based on two stocks, S and B. Stock...
2. An investor can design a risky portfolio based on two stocks, S and B. Stock S has an expected return of 12% and a standard deviation of return of 25%. Stock B has an expected return of 10% and a standard deviation of return of 20%. The correlation coefficient between the returns of S and B is 0.4. The risk-free rate of return is 5% a. The proportion of the optimal risky portfolio that should be invested in stock...
Consider the Isoquant/Isocost model. Draw a graph that shows the optimal quantity of capital being hired...
Consider the Isoquant/Isocost model. Draw a graph that shows the optimal quantity of capital being hired increasing after a change in the input market. Give an example of what the change in the input market could have been.
18. Which of the following statements about the minimum variance portfolio of all risky securities are...
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT