Markowitz theory indicates to create and construct a portfolio of assets to maximize returns within a given level of risk, or to devise one with a desired, specified and expected level of return with the least amount of risk. Under this broader concept, answer the followings: Justify, why an optimal portfolio should lie on security market line curve

Q: process

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

Q: Which of the following risks can be eliminated through diversification? a. Systematic risk b.…

A: Idiosyncratic risk is a risk for a particular investment or company. It is also called unsystematic…

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Which of the following statements is true? Select one: Total risk = market risk + unique risk.…

A: systematic risk is beta

Q: How would the risk premium work out for a riskier investment?

A: A risk premium is a return on venture over the hazard free rate a financial specialist requires to…

Q: fter combining a riskfree asset with the efficient frontier of risky portfolios, you no longer need…

A: Step 1 The effective limit of a set of relevant portfolios provides the highest expected return on a…

Q: What outcomes are possible with speculative risk?​

A: Speculative risk is a form of risk in which the outcome is unknown and there is a chance of both…

Q: The higher a security's risk, the higher the return investors demand, and thus the less they are…

A: Risk on security is defined as the risk of not getting actual return as per the expectations of the…

Q: What is the y risk-free investment?

A: Risk-free rate of return is the rate of return that an investor expects from an investment in any…

Q: Explain the concept of immunization within a portfolio management context. How can immunization be…

A: Introduction: Portfolio management refers to the process of managing an investor's investments,…

Q: Using examples, explain how firms are affected by both systematic and firm-specific risk. What is…

A: There are two types of risk systemic risk and firm specific risk.

Q: What security provides a good estimate of the real risk-free rate?

A: A Treasury bill (T-Bill) is the short-term liability of US public debt supported for 1 year or…

Q: What are the factors in determining the expected rate of return of LPs? Group of answer choices a.…

A: Limited partners (LPs) are investors in a limited partnership, such as a venture capital (VC) fund…

Q: Along the CAL you can choose different combinations from the same risky asset and risk-free asset -…

A: Capital Allocation Line is a graphical representation of a combination of risk free asset and risky…

Q: What kind of investment is considered to be risk-free?

A: A risk-free investment is an investment that has a minimum or no fluctuation from the expected…

Q: Compare and contrast systematic and unsystematic risk and how it affects a portfolio.

A: Risk in a portfolio refers to the likelihood of losing money or not achieving the desired returns on…

Q: What does it mean that portfolio diversification can reduce risk, and how does the efficient…

A: Risk is the measurable probability of loss on an investment. It includes the possibility of losing…

Q: Why is the default F risk in a CMBS offering given more attention?

A: A default risk is the likelihood that the guarantor of a bond won't have the option to reimburse the…

Q: How do you perceive the relationship between risk and return in the context of investment…

A: The relationship between risk and return is a fundamental concept in finance and investment. In…

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…