Assume the following risk-return possibilities for 8 different portfolios. b. Id

ID: 2823375 • Letter: A

Question

Assume the following risk-return possibilities for 8 different portfolios.

b. Identify the efficient portfolios

Portfolio Return Risk

A 20% 18%

B 22 24

C 20 21

D 26 21

E 15 10

F 15 16

G 27 22

H 31 22

A portfolio is said to be dominating (efficient) the other if;

The expression A>B means stock A is the efficient stock and stock B is the inefficient stock.

Hence efficient portfolios are A,D,E and H. The form part of efficient frontier.

Return Risk Efficient stock A>C Same lower A E>F Same lower E D>C high same D H>G high same H

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