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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Is it possible to construct a portfolio of foal-world stocks that has a required return equal to the risk-free rate? Explain.

Summary Introduction

To explain: The possibility of constructing a portfolio which has required return equal to the risk-free rate.

Portfolio:

The portfolio refers to a group of financial assets like bonds, stocks, and equivalents of cash. The portfolio is held by investors and financial users. A portfolio is constructed as per the risk tolerance and the objectives of the company.

Explanation
  • The portfolio is a combination of securities and basically, there are two kinds of portfolio, aggressive portfolio and conservative portfolio.
  • The aggressive portfolio is designed in a manner that high returns can be earned, for this, a higher risk rate is taken. So, it is not possible to keep the required return and risk-free rate equal in aggressive portfolio...

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