5. Consider the figure below a. The efficient frontier is i. Shown by the line A

Question

5. Consider the figure below a. The efficient frontier is i. Shown by the line ABC ii. Shown by the line AB ii. Shown by the straight line with points DBE iv. Shown by point B b. for all possible portfolios of The straight line with points D, B and E shows risky assets i. ii. iii. iv. The average Sharpe ratio All possible Sharpe ratios The maximum Sharpe ratio The minimum Sharpe ratio c. At the point D, an investor is holding i. Only risky asset:s ii. Some risky assets and some of the riskfree asset ii. Risky assets and has borrowed at the riskfree rate to increase leverage iv. An inefficient portfolio d. At the point E, an investor is holding i. Only risky assets li. Some risky assets and some of the riskfree asset ii. Risky assets and has borrowed at the riskfree rate to increaseleverage iv. An inefficient portfolio Expected Return ERE ERo Standard deviation

Explanation / Answer

5a. The efficiency frontier is : i) Shown by the line ABC

5b. The straight line ABC shows :ii) All possible sharpe ratios

5c. At D, an investor is holding: ii) Some risky assets and some risk-free assets

5d. At E, an investor is holding iii) Risky assets and has borrowed at the risk free rate to increase leverage

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