Mr. Boone is looking at a number of different types of investments for his portfolio. He identifies eight possible investments.

a. Graph the data in a manner similar to Figure 13-11.
b. Draw a curved line representing the efficient frontier.
c. What two objectives do points on the efficient frontier satisfy?
d. Is there one point on the efficient frontier that is best for all investors?

Transcribed Image Text:

Return Risk Return 14% Risk 4.0% 1.5% 10% 11 A 3.0 3.5 5.0 5.5 14 13 G 15 13 4.0 17 7.0 Figure 13-11 Risk-return tradeoffs Return in percent Risk level (beta, coefficient of variation)