1. The mean-variance approach to portfolio selection extends back to the pioneering work of Markowitz in the early 1950's. a. Explain the conditions under which the mean-variance approach for portfolio selection is valid. Indicate the important assumptions that are required regarding an investor's preferences between wealth today vs. risky wealth tomorrow. Highlight the key conclusions that lead to the importance of the Efficient frontier and its implications for investors of differing attitudes towards risk (6 marks) b. Markowitz's original model was extended by Tobin in the late 1950's with the inclusion of the risk-free security. The presence of the risk-free security provides investment opportunities via the concept of "separation whereby investors may not need to worry about the entire efficient frontier. Explain the concept of "separation and its implications for investors of differing attitudes towards risk (6 marks) 1. The mean-variance approach to portfolio selection extends back to the pioneering work of Markowitz in the early 1950's. a. Explain the conditions under which the mean-variance approach for portfolio selection is valid. Indicate the important assumptions that are required regarding an investor's preferences between wealth today vs. risky wealth tomorrow. Highlight the key conclusions that lead to the importance of the Efficient frontier and its implications for investors of differing attitudes towards risk (6 marks) b. Markowitz's original model was extended by Tobin in the late 1950's with the inclusion of the risk-free security. The presence of the risk-free security provides investment opportunities via the concept of "separation whereby investors may not need to worry about the entire efficient frontier. Explain the concept of "separation and its implications for investors of differing attitudes towards risk (6 marks)