Portfolio Management - Portfolio Management Section 1
- Option : A
- Explanation : The standard deviation of the portfolio is directly proportional to the correlation of assets within the portfolio.
- Option : B
- Explanation : The efficient frontier is the part of the minimum variance frontier which represents the set of portfolios that will give the highest return at each risk level.
- Option : A
- Explanation : With the efficient frontier we are only allowed to invest in risky assets. With the CAL this constraint is relaxed and we are also allowed to invest in the risk-free asset.
- Option : B
- Explanation : The use of leverage and the combination of a risk-free asset and the optimal risky asset will dominate the efficient frontier of risky assets (the Markowitz efficient frontier).
- Option : C
- Explanation : The optimal risky portfolio lies at the point of tangency between the capital allocation line and the efficient frontier of risky assets.
*/?>
*/?>
*/?>
*/?>