The line originating from the risk-free rate to tangentiallyintersect the Efficient Frontier of Portfolios is...

The line originating from the risk-free rate to tangentially intersect the Efficient Frontier of Portfolios is often called:

Select one:

a. The Capital Market Line

b. Alpha

c. Beta

d. The coefficient of determination

Expert Solution

The correct answer is "A"

Capital Market Line is the line that decides the allocation in a portfolio. An investor may invest anywhere between the Rf and the intersection of Efficient Frontier. If an investor is situated more towards the left, then it means that the investor is risk-averse and invests most funds in Rf securities. If the investment point is more towards right, then it means that the portfolio is invested more towards market.

jeff jeffy answered 2 years ago

Which of the following portfolios would be off the efficient frontier? Expected Return Risk Portfolio A...

Which of the following portfolios would be off the efficient frontier? Expected Return Risk Portfolio A 13% (er)17% (risk) Portfolio B 12 (er) 18 (risk) Portfolio C 18 (er) 30 (risk)

Why do we want portfolios on efficient frontier (EF) rather than the portfolios on the lower...

Why do we want portfolios on efficient frontier (EF) rather than the portfolios on the lower part of the portfolio possibilities curve (PPC)?

What happens to an efficient frontier when you add a risk-free asset to it? You can...

What happens to an efficient frontier when you add a risk-free asset to it? You can project a picture of the graph or hand draw one to explain

a. What is the risk level of a portfolio on the efficient frontier with a return...

a. What is the risk level of a portfolio on the efficient frontier with a return of 6% when the market portfolio has an expected return of 10% and the risk free rate is 2%? The standard deviation of the returns on market is 14%. b. What is the expected rate of return and alpha of a stock with a ? of 0.9, when the realised gain on the stock is 13% next year?

What is the difference between efficient frontier and capital allocation line? Please explain it from the...

What is the difference between efficient frontier and capital allocation line? Please explain it from the perspective of their compositions? (4pts)

If Portfolio B is the optimal risky portfolio on the Eﬃcient Frontier, is the risk-free rate 0.05 or 0.08?

There are two risky portfolios on the Eﬃcient Frontier: Portfolio A has an expected return of 0.10 with a variance of returns of 0.0625. Portfolio B has an expected return of 0.12 with a variance of returns of 0.16. If Portfolio B is the optimal risky portfolio on the Eﬃcient Frontier, is the risk-free rate 0.05 or 0.08?

The efficient frontier is composed of the best possible combinations of risk and return for well...

The efficient frontier is composed of the best possible combinations of risk and return for well diversified portfolios. As a result, the investor should always choose the portfolio on the efficient set that maximizes the Sharpe ratio. In a world of positive transaction costs how often should a portfolio manager rebalance their portfolio to make sure it is on the efficient frontier?

• The risk-free rate in the US is 5% and the UK risk-free rate is 8%....

• The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The spot quote is $1.80/£ while the one year forward quote is $1.78/£. You can borrow either $1,000,000 or £555,556. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not correct, lay out the steps to implement an arbitrage. The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume...

The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The...

The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The spot quote is $1.80/£ while the one year forward quote is $1.78/£. You can borrow either $1,000,000 or £555,556. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not correct, lay out the steps to implement an arbitrage.

What does the efficient frontier represent?

Question