Exercise

Interpreting the efficient frontier

In the previous exercise you computed the efficient frontier from a grid of potential target returns. In this exercise you will interpret the chart produced from the data you created in the previous exercise.

Look at the chart to your right and identify which of the following is true.

Instructions

50 XP

Possible Answers

The minimum variance portfolio has a monthly volatility of 0.
The maximum return portfolio has a monthly volatility that is lower than the tangency portfolio.
The portfolio with the greatest excess return per unit of portfolio volatility is the tangency portfolio.
None of the above are true.

Take Hint (-15 XP)