As a financial analyst, you are asked to analyze a portfolio of five ETFs for a client whose utility function is u= E(r) -0.5 x 30 x σ^2. If the risk free asset with a monthly rate of 0.25% is available for you client to borrow or lend, you know that you could construct an optimal capital allocation line (CAL) using the risk free asset and a risky portfolio from the minimum variance frontier. Which of the following portfolios should you choose to form the optimal CAL?



portolio      Standard deviation monthly return.     E(r) of monthly return

w.                        1.81%.                                                 0.63%

x.                         4.80%.                                               0.91%

y.                          3.86%.                                               0.84%

z.                          1.66%.                                               0.51%

Answer rating: 100% (QA)

To construct the optimal capital allocation line CAL we need to find the ... View the full answer