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The efficient frontier graphs are shown below, talk about Modern Portfolio Theory and explain how the frontier is derived and why it is efficient. Make sure you talk about Sharpe Ratio from the second graph.

Portfolio expected return E(rp) Efficient frontier of risky assets Minimum- variance portfolio Individual assets Op Portfolio standard deviation 0.18 0.16 0.7 0.14 0.6 0.12 0.5 0.10 expected return sharpe Sharpe ratio 0.08 0.4 0.06 0.3 0.04 0.2 0.02 0.12 0.14 0.20 0.22 0.16 0.18 expected volatility