Question 10 Finneas the financial analyst believes to have found the optimal risk portfolio (denoted by P) and draws a capital allocation line (CAL) based on this portfolio (dashed red line). You are Finneas's supervisor, and ultimately responsible for Finneas's work product. Is Finneas's CAL correct, and if not, how would you fix it? Expected Return 60% 50% 40% 30% 20% 10% 0% --== OYes 0.5 1 Standard Deviation 1.5 O No, the slope of the CAL should be higher, such that the CAL is tangent to the minimum variance frontier at only one point O No, the slope of the CAL should be lower O No, the slope of the CAL should be higher, such that the CAL is above the minimum variance frontier O Not enough information to tell
Question 10 Finneas the financial analyst believes to have found the optimal risk portfolio (denoted by P) and draws a capital allocation line (CAL) based on this portfolio (dashed red line). You are Finneas's supervisor, and ultimately responsible for Finneas's work product. Is Finneas's CAL correct, and if not, how would you fix it? Expected Return 60% 50% 40% 30% 20% 10% 0% --== OYes 0.5 1 Standard Deviation 1.5 O No, the slope of the CAL should be higher, such that the CAL is tangent to the minimum variance frontier at only one point O No, the slope of the CAL should be lower O No, the slope of the CAL should be higher, such that the CAL is above the minimum variance frontier O Not enough information to tell
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please help correctly and also explain the reason for incorrect options.
Transcribed Image Text:Question 10
Finneas the financial analyst believes to have found the optimal risk portfolio (denoted by P) and
draws a capital allocation line (CAL) based on this portfolio (dashed red line). You are Finneas's
supervisor, and ultimately responsible for Finneas's work product. Is Finneas's CAL correct, and if
not, how would you fix it?
Expected Return
60%
50%
40%
30%
20%
10%
0%
0
Yes
---
0.5
Standard Deviation
1.5
O No, the slope of the CAL should be higher, such that the CAL is tangent to the minimum variance frontier at
only one point
O No, the slope of the CAL should be lower
O No, the slope of the CAL should be higher, such that the CAL is above the minimum variance frontier
O Not enough information to tell
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