Portfolio Management - Portfolio Management Section 1
- Option : A
- Explanation : The capital allocation line, CAL, is a combination of the risk-free asset and one or more risky assets.
- Option : C
- Explanation : The optimal portfolio for an investor like Sam is the one where the CAL is the tangent to the investor’s highest possible indifference curve.
- Option : B
- Explanation : Highly risk-averse investors invest majority of their wealth in risk-free assets.
- Option : B
- Explanation : A capital allocation line shows possible combinations of a risky portfolio and the risk-free asset.
- Option : B
- Explanation : An investment in only one asset type has a worse risk-return tradeoff than an investment in a portfolio of a risk-free asset and a risky asset because the correlation between the risk-free asset and the risky asset is equal to 0.
*/?>
*/?>
*/?>
*/?>