Create a portfolio with a lower standard deviation

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Reference no: EM131520670

Uncle Bill is less risk averse than most investors. He would like to create a portfolio with a lower standard deviation and a higher expected return than the market portfolio. You would tell Bill:

1- this is impossible in equilibrium

2 - to borrow funds at the risk-free rate and invest them in the market portfolio

3 - to invest more of his wealth in the risk-free security than in the market portfolio

4 - to allocate funds between the market portfolio and the risk-free asset such that his portfolio will lie to the right of the market portfolio on the CML

5 - to find the portfolio at the point of tangency between the efficient set and the CML

Reference no: EM131520670

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