Optimination project

Optimination project - Professor Jones BUS172B Project 1...

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Professor Jones BUS172B 11/2/2009 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: . The composition of the market portfolio is: S&P 500 236.41% 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 7.11% and the expected return point 13.51% 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 close to the midpoint there is no borrowing/lending of the risk free asset involved.
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