Questions 1-6 refer to the following graph of risk vs. return for a basket of po

Question

Questions 1-6 refer to the following graph of risk vs. return for a basket of possible portfolios, where each lettered point represents a different portfolio. The shaded area represents all possible stock portfolios Expected return 6.0% 2.35% 0% Risk 1. Which portfolio is infeasible? B/E C. G D. all of the above are feasible 2. Which portfolio has the highest return? D. D 3. which portfolio represents 100% allocation into US Treasuries? A. B B. C C. D D. E 4. I,the risk free rate is 2.35%, which is the optimal stock portfolio? B. B C. D D. E

Explanation / Answer

1. Portfolio E is infeasible because the portfolio always comes under the efficient frontier, which encloses all the combination of risk-return portfolios. And secondly, the risk and return always go hand-in-hand, whereas E has the highest return with minimum risk.

2.Portfolio B has the highest return, as it hovers at the top of the efficient frontier.

3. US Treasury is the government bond that doesn’t have any risk involved. Hence, it gives the minimum return based on the current yield. The correct answer should be G, but it is not given in the option.

4. A is the optimal stock portfolio; with minimum risk it gives the maximum return.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.