Consider the following graph.   According to Markowitz’ portfolio theory, which point on the graph represents optimal portfolio?       C     A     B     D

Q: process

A: The optimal portfolio for any investor would include both risk free assets & risky assets. The…

Q: What is Sharpe ratio? Show the link between Sharpe ratio and best efficient portfolio.

A: Sharpe ratio was developed by William F. Sharpe so that investors can analyze the returns earned…

Q: Illustrate the formula for portfolio beta and portfolio expected return.

A: Portfolio refers to a set of financial investments owned by the investor. The portfolio of…

Q: Define the following terms, using graphs or equations to illustrate youranswers wherever feasible:a.…

A: Portfolio Sets of assets are termed as a portfolio. A portfolio comprises the number of bonds,…

Q: . Write out the equation for the Capital Market Line(CML), and draw it on the graph. Interpret…

A: The capital market line has a slope of and intercept of .Therefore, the equation for the capital…

Q: main investment in an optimal portfolio

A: Optimal portfolio helps to minimize the risk for a give rate of return or its helps to maximize  the…

Q: what is a zero cost strategy in portfolios

A: A zero cost strategy is a business strategy or decision that doesn’t have nay expenses. It doesn’t…

Q: Describe how a risk-free portfolio can be created using stocks and options. How cansuch a portfolio…

A: Risk-free portfolio can be created by purchasing stock of the company and buying the put option on…

Q: What is the portfolio beta?

A: To calculate the portfolio beta we will multiply weight of each stock with beta of each stock.

Q: Define expected rate of return on a portfolio

A: Expected Return: The expected return is the minimum required rate of return which an investor…

Q: In what circumstances would you use one of the available risk measurements used in Modern Portfolio…

A: Modern portfolio theory refers to the theory of investment that allows the investors for…

Q: How does an efficient portfolio relate to a feasible portfolio?

A: PortfolioSets of assets are termed as a portfolio. A portfolio comprises the number of bonds,…

Q: Briefly explain on elements of Modern Portfolio Theory.

A: Modern portfolio theory brings correlation between risk and return for investors.

Q: Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is…

A: Answer; a. efficient frontier.

Q: If a portfolio has a positive investment in every asset, can the beta of the portfolio be less than…

A: Beta of the portfolio is the weighted average of individual asset's betas in the portfolio

Q: Conceptually, how does an investor choose his or her optimal portfolio?

A: The point where any of the ‘indifference curve’ are tangent to the efficient set of portfolios is…

Q: Use the following CAPM equation for a portfolio to answer the questions that follow: E(RP) = RF + βP…

A: Here, E(RP) is 4.2% RF is 1 % βP is 0.8 RM is 5% Actual Portfolio Return is 6%

Q: Which are the Elements of Portfolio Theory?

A: Portfolio theory: The theory of portfolio is about risk and return. The investor is concerned…

Q: What is the constrained portfolio method or portfolio optiomatization? Why would an investor prefer…

A: Diversified portfolio- It refers to a portfolio of investments in which unsystematic risk or firm…

Q: The amount invested is one of the required inputs in a portfolio optimization model. True or False

A: Portfolio optimization is the process where the best portfolio out of many is chosen based on the…

Q: how to calculate portfolio beta?

A: Beta is used while calculating the volatility of the investment. It measures the systematic risk of…

Q: Define Expected return on a portfolio

A: The expected return is the profit or loss an investor anticipates on an investment that has known or…

Q: In terms of the Markowitz portfolio model, explain how an investor identifies his / her optimal…

A: The question is based on the concept of modern portfolio theory (MPT) and approach. MPT explains the…

Q: What is the relationship between the efficient portfolio and the feasible portfolio?

A: An efficient portfolio can be defined as portfolio which maximizes return for given level of risk or…

Q: An efficient portfolio is one that:   Select one: a.   maximises return for a given level of…

A: Efficient Portfolio is the Portfolio or group of stocks invested which maximises the expected rate…

Q: Describe how a risk-free hedge portfolio can be created usingstocks and options

A: Hedging: The transaction that deceases the risk of the firm that can take place due to fluctuations…

Q: Can the standard deviation of a portfolio be zero? Explain your answer.

A: Standard deviation of a portfolio measures the volatility of returns,i.e. how much the returns…

Q: Which of the following portfolios achieves the highest Sharpe ratio? (check all that applies)…

A: Sharpe ratio of portfolio indicates the how much is the performance of portfolio based on the the…

Q: Calculate Portfolio Returns with example?

A: The determination of profit or loss on the investment in a portfolio is called portfolio return. The…

Q: What is the portfolio's return?

A: The total investment returns produced on individual assets multiplied by the weight class of that…

Q: Discuss the role of risk-free assets in the Markowitz Portfolio Theory.

A: Harry Markowitz always focused on lowering the risk and diversification in order to maximize the…

Q: What is the expected return on a portfolio v

A: The expected return on an investment refers to the weighted average of estimated returns and…

Q: Explain the impact and significance Separation Theorem has when chosing the optimal portfolio.

A: Fisher's separation theorem states that the primary goal of any corporation is to increase its…

Q: What is optimal portfolio?

A: One that minimises the risk for a given level of return or maximises the return for a given level of…

Q: The portfolio with the highest Sharpe Ratio is I. The minimum-variance point on the efficient…

A: Sharpe ratio refers to the measurement of the risk-adjusted returns of the financial portfolio.…

Q: Define the following terms, using graphs or equations to illustrate youranswers wherever feasible:…

A: Definition of following terms uses in portfolio theory and assets pricing models are shown below:…

Q: One important assumption behind portfolio theory is that investors are “mean-variance maximizers.”…

A: The importance of mean variance maximizers and reflection of the same in the context of the…

Q: Can someone explain and give an example of markowitz portfolio theory?

A: The question is based on the concept of Markowitz portfolio theory also called Modern portfolio…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.