Project #1 - Professor Jones BUS172B MW 300 14 March 2007...

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Professor Jones BUS172B MW 300 14 March 2007 Project 1: Optimization Project 1. Using the data in the portfolio optimization program, develop the EF (efficient frontier). Also develop the CML (capital market line). Provide the equation for the CML. What is the composition of the PM (market portfolio)? The equation for the capital market line (CML) is: [ ] σ s f M f r r E r r E - + = ) ( ) ( . The composition of the market portfolio is: 236.41% IA Small Stock 40.81% IA All Value -153.57% IA All Growth -102.76% MSCI EAFE -1.87% LB Muni 80.97% 2. Select the point on the CML which is your personally optimal point. Why did you select this point? At this point, how much borrowing/lending of the risk free asset is involved? I select the standard deviation point 7.29% and the expected return point 11.29% on the CML which is my personally optimal point. I selected this point because I am a risk averse. I do not want to be involved with something too risky. I decided to choose a point that is near the actual optimal point with a low risk and a decent expected return. By choosing a point that is
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Project #1 - Professor Jones BUS172B MW 300 14 March 2007...

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