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QUESTION
Consider two portfolios that each consist entirely of risky assets. Portfolio 1 has an expected return of 10% and a standard deviation of 18%. Portfolio 2 has an expected return of 15% and a standard
Consider two portfolios that each consist entirely of risky assets. Portfolio 1 has an expected return of 10% and a standard deviation of 18%. Portfolio 2 has an expected return of 15% and a standard deviation of 38%. The risk-free rate is 5%. Which statement is true?
It is not possible that Portfolio 1 is the 'optimal risky portfolio.'
b.
It is not possible that Portfolio 2 is the 'optimal risky portfolio.'
c.
Based on the information given, either one could be the optimal risky portfolio.
