Question
1. Your team has been asked to help a portfolio manager write programme to create effective frontier and to provide and optimal investor portfolio. You
1. Your team has been asked to help a portfolio manager write programme to create effective frontier and to provide and optimal investor portfolio. You have been asked to help the team understand how an effective frontier is created Using equations and diagrams.
(a) Explain to the team the relationship of variance, risk, Covariance and Correlation.
(b) Explain how risk varies with the weights given to each stock for many assets.
(c) Explain how the effective frontier is developed.
2. Explain the various scenarios, based on different business needs that you may face, and the kinds of development approaches you may choose for your team to undertake. You are required to devise at least four different scenarios. For each suggested development approach, justify their suitability and consequences in terms of potential advantages and disadvantages.
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