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Explain the nature of the efficient frontier

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Reference no: EM132967273

Question - Suppose that a market has two portfolios Q and to invest in. Portfolio Z is a portfolio of a single risk-free assets. Portfolio Q is a portfolio of risky assets.

I. Explain the nature of the efficient frontier of these two portfolios. You must clearly state your assumptions

II. Explain the relationship between the efficient frontier in part (I) and portfolio Q.

III. Suppose that the investors in this market have homogeneous expectations. Explain the nature of the efficient frontier facing them.

IV. Using your answer in part (II) explain the relationship between risk aversion and portfolios Q and Z.

Reference no: EM132967273

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