A lawyer prosecuting a lawsuit against The Brokerage Company has hired you to conduct an investigation into the advice the company has been giving its clients. You observe that clients have invested in the following portfolios:

Evaluate the advice the Brokerage Company has been giving its clients. (Assume that investors can only invest in one of the six portfolios.)
a. Evaluate the investors who are holding inefficient portfolios.
i. Which investors are holding inefficient portfolios? Examine it by a graph with standard deviation on the x-axis and expected return on the y-axis.
ii. The broker under investigation argues that these portfolios are appropriate because the investors are risk loving. Are inefficient portfolios appropriate for risk-loving investors?
b. Use return/risk to evaluate the investors who are holding efficient portfolios. Who is
i. The most risk averse?
ii. The least riskaverse?

  • CreatedFebruary 25, 2015
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