d) Explain why any mean-variance optimising investor (i.e., an investor who maximises expected return for a given standard deviation; or who minimises standard deviation for a given expected return):

i. will not hold a mean-variance dominated asset or portfolio by itself; (5 marks)

ii. but instead will hold a portfolio that lies on the line from the risk-free asset, (E(R), SD(R)) = (Rf, 0), tangent to the efficient frontier of risky assets. What is the name of this line? (4 marks)

e) Briefly explain:

i. What efficient portfolio is; (3 marks)

ii) what the beta of a stock measures. (3 marks)