• Curved Efficient Frontier offers many choices of optimal portfolios Only the upward portion of the curved Efficient Frontier is efficient. This curved frontier is obtained by mixing risky securities and a risk free security available in the market.

• Portfolio B and Portfolio P have the same standard deviation of their returns. However, Portfolio P is more efficient than Portfolio B, because it lies on the Curved Efficient frontier

• Portfolio C can be made by mixing a risk free asset such as US T-bill offering a return R_f and a tangency portfolio M that holds all the risky securities in some proportion. This portfolio C on the Capital Market Line (CML) will be more efficient than a portfolio Q of equal risk that lies on the Curved Efficent Frontier.

• Portfolio C is a borrowing portfolio

• Both C and D above

Refer to the following figure: CML B Linear Efficient Frontier E(R3) 19 M E(RM) 14 S&P500 P E(R) Curved Efficient Frontier E(RA) = E(R) A Q R, 4 0 OA 0 = 0 OB = OP Refer to the following figure: CML B Linear Efficient Frontier E(R3) 19 M E(RM) 14 S&P500 P E(R) Curved Efficient Frontier E(RA) = E(R) A Q R, 4 0 OA 0 = 0 OB = OP