T4+2010 - Fina 3104 L2 T4 Return Homework 1 Practice...

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Fina 3104 1 Fina 3104 L2 T4 § Return Homework 1 § Practice Problems on Portfolio Analyses and the Markowitz Portfolio Selection Model
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Fina 3104 2 True or False, explain (a) The efficient frontier includes the set of all possible optimal complete portfolios. The optimal complete portfolio is picked from the efficient frontier using indifference curves. Practice Problem 1a-Castcolt(5 mins)
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Fina 3104 3 (a) FALSE. The efficient frontier includes the set of all possible optimal risky portfolios only. The optimal risky portfolio is at the tangent point where the Capital Allocation Line (CAL) touches the efficient frontier. The optimal complete portfolio is picked from the CAL using indifference curves. (Note: The statement is TRUE if there is no risk-free asset. In that case, the optimal complete portfolio is the optimal risky portfolio, which is Solution
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4 True or False, explain (b) As long as the correlation between Security X and the original portfolio is not 1, adding X to the portfolio can lower the portfolio standard deviation. Practice Problem 1b- Castcolt(5
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This note was uploaded on 11/27/2011 for the course FINA 3104 taught by Professor Darwin during the Spring '11 term at HKUST.

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T4+2010 - Fina 3104 L2 T4 Return Homework 1 Practice...

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