(a)

Based on the return and risk profile of the four portfolios below, discuss which portfolio cannot lie on the efficient frontier as described by Markowitz?

Portfolio Expected Return Standard Deviation

U 9% 21%

V 5% 7%

W 15% 36%

X 12% 15%

(b)

Draw a kinked capital allocation (CAL) line first. And then discuss what causes the line to be kinked.