CML 3.5% 3.0% 2.5% Risky Portfolio, 3.79%, 2.22% B, 6.90%, 2.34% 2.0% Optimal Portfolio, 1.89%, 1.71% OD, 3.45%, 1.77% 1.5% A, 5.93%, 1.53% EWP, 3.38%, 1.43% C, 2.97%, 1.36% 1.0% 0.5% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% As a matter of policy, you point out to the board of directors that a portfolio consisting of only equities can be risky. You advise that an alternative portfolio could include other investments such as fixed interest securities. Consequently, the Treasure note is included in the possible portfolios with other 7 stocks. Thus, you reconstruct the efficient set that is the Capital Allocation Line (CAL). Provide comments on (1) the optimal portfolio (the tangency portfolio), (ii) recommend portfolio C restructured from the risk free asset and portfolio A, (iii) recommend portfolio D restructured from risk free asset and portfolio B. Compare your solution of portfolios C and D with your previous equity-only portfolios A and B. In this section, short selling of the riskless assets is allowed and short selling of risky assets is allowed under the constraint that the proportion Xi>= -5 (or others such as -3 by your definition) CML 3.5% 3.0% 2.5% Risky Portfolio, 3.79%, 2.22% B, 6.90%, 2.34% 2.0% Optimal Portfolio, 1.89%, 1.71% OD, 3.45%, 1.77% 1.5% A, 5.93%, 1.53% EWP, 3.38%, 1.43% C, 2.97%, 1.36% 1.0% 0.5% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% As a matter of policy, you point out to the board of directors that a portfolio consisting of only equities can be risky. You advise that an alternative portfolio could include other investments such as fixed interest securities. Consequently, the Treasure note is included in the possible portfolios with other 7 stocks. Thus, you reconstruct the efficient set that is the Capital Allocation Line (CAL). Provide comments on (1) the optimal portfolio (the tangency portfolio), (ii) recommend portfolio C restructured from the risk free asset and portfolio A, (iii) recommend portfolio D restructured from risk free asset and portfolio B. Compare your solution of portfolios C and D with your previous equity-only portfolios A and B. In this section, short selling of the riskless assets is allowed and short selling of risky assets is allowed under the constraint that the proportion Xi>= -5 (or others such as -3 by your definition)