Intuition Questions After receiving a corrected analytical solution, should you then proceed with answering the intuition questions below to prepare for the meeting with the client Your client asks why you would combine Portfolio (A), which has a lower Sharpe ratio, with Portfolio (B) to arrive at the optimal risky portfolio Prepare a clear and concise response to your client Your client believes in the weak form of market efficiency as it relates to security selection Is Portfolio As performance enough justification to prove or disprove this belief Why or why not After further discussions with your client, it turns out that she believes in the semi strong form of market efficiency as it relates ONLY to security selection, what portfolio substitution(s) would you make to your optimal risky portfolio No calculations are necessary After meeting with the client, she informs you that she prefers a return higher than that of the optimal risky portfolio Is this possible to achieve and if so, how What does that indicate about your initial assumptions regarding the indifference curve Portfolio A returned 9 20 p a over the evaluation period compared to a 5 00 p a for the S P 500 This equates to a difference or outperformance of 4 20 p a According to CAPM, the annualized alpha of portfolio A is 4 74 p a Explain the difference between the two numbers (Note It is not due to rounding)

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Intuition Questions After receiving a corrected analytical solution, should you then proceed with answering the intuition questions below to prepare for the meeting with the

Intuition Questions

After receiving a corrected analytical solution, should you then proceed with answering the intuition questions below to prepare for the meeting with the client.

Your client asks why you would combine Portfolio (A), which has a lower Sharpe ratio, with Portfolio (B) to arrive at the optimal risky portfolio. Prepare a clear and concise response to your client.
Your client believes in the weak form of market efficiency as it relates to security selection. Is Portfolio As performance enough justification to prove or disprove this belief? Why or why not?
After further discussions with your client, it turns out that she believes in the semi-strong form of market efficiency as it relates ONLY to security selection, what portfolio substitution(s) would you make to your optimal risky portfolio? No calculations are necessary.
After meeting with the client, she informs you that she prefers a return higher than that of the optimal risky portfolio.
1. Is this possible to achieve and if so, how?
2. What does that indicate about your initial assumptions regarding the indifference curve?
Portfolio A returned 9.20% p.a. over the evaluation period compared to a 5.00% p.a. for the S&P 500. This equates to a difference or outperformance of 4.20% p.a. According to CAPM, the annualized alpha of portfolio A is 4.74% p.a. Explain the difference between the two numbers. (Note: It is not due to rounding)