# Question: Describe how adding a risk free security to modern portfolio theory

Describe how adding a risk-free security to modern portfolio theory allows investors to do better than the efficient frontier.

## Relevant Questions

Show on a graph like Figure where a stock with a beta of 1.3 would be located on the security market line. Then show where that stock would be located if it is undervalued. Compare and contrast the assumptions that need to be made to compute a required return using CAPM and the constant growth rate model. Why do most investment scams conducted over the Internet and e-mail involve penny stocks instead of S&P 500 Index stocks? You own $10,000 of Denny’s Corp stock that has a beta of 2.9. You also own $15,000 of Qwest Communications (beta = 1.5) and $5,000 of Southwest Airlines (beta = 0.7). Assume that the market return will be 11.5 percent and ...For the same economic state probability distribution in Problem, determine the standard deviation of the expected return.In Problem, Compute the expected return given these three economic states, their likelihoods, and the ...Post your question