According to the Markowitz Model, the optimal portfolio for an investor is at the point of tangency between the efficient frontier and the: Highest possible utility curve Lowest possible utility curve The horizontal utility curve The steepest utility curve The flattest utility curve None of the above answers is correct

According to the Markowitz Model, the optimal portfolio for an investor is at the point of tangency between the efficient frontier and the: Highest possible utility curve Lowest possible utility curve The horizontal utility curve The steepest utility curve The flattest utility curve None of the above answers is correct

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 1Q

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which one is correct? QUESTION 6 Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is known as the a. efficient frontier. b. utility curve. c. last frontier. d. efficient portfolio. e. capital asset pricing model.
Assume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function? [I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium [II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk [III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio [IV] The extent to which the investor dislikes risk is captured by ? 2 A. [II] only B. [I], [II] only C. [III] , [IV] only D. [II], [IV] only E. [I], [II], [III] only
Pick the correct statement: a. The Optimal Risk Portfolio and the Overall Optimal Portfolio are the same. b. The Overall Optimal Portfolio is the same for all investors. c. The Optimal Risky Portfolio is the same for all investors. d. The Overall Optimal Portfolio is the point of the efficient frontier where the Capital Allocation Line is tangent to the efficient frontier.
The beta of a market-neutral portfolio is zero. O True O False
6 - The Markowitz Model considers a portfolio to be efficient if: No other portfolio offers a higher expected return with the same risk No other portfolio offers a lower risk with the same expected return There is no portfolio with a higher return Answers a. and b. are both correct All of the above answers are correct None of the above answers is correct
can you draw a profit diagram of the portfolio above and state any assumptions that must be made. Also, is the cost of the portfolio positive?
6. On the basis of the utility formula below, which investment would you select if you were risk averse with A = 4? Standard Expected return E(t) deviation Investment 0.12 0.30 0.15 0.50 0.21 0.16 0.24 0.21
* Consider the following portfolio II: long one call with exercise price E₁, long one put with exercise price E2, short one call with exercise price E, and short one put with exercise price E1+E2 E. Consider the case E₁ < E < E2 where E < 2 ⚫ (a) Write down the pay-off function A(S) for the portfolio II. • • (b) What is the value of the pay-off function when S < E₁? (c) What is the value of the pay-off function when E < S < E₂?
Please oll option information and correct answer
Question 5 Choose the correct answer for the following: (1) Which is the best measure of risk for choosing an asset which is to be held in isolation? (2) Which is the best measure for choosing an asset to be held as part of a diversified portfolio? O Variance; correlation coefficient. O Standard deviation; correlation coefficient. O Beta; variance. O Coefficient of variation; beta. O Beta; beta.
M3
Which one of the following statements is correct? Group of answer choices The lower the average return, the greater the risk premium. The greater the volatility of returns, the greater the risk premium. The lower the volatility of returns, the greater the risk premium. The risk premium is not affected by the volatility of returns. The risk premium is unrelated to the average rate of return.