Question: a) How is an efficient frontier constructed and how can it be used to determine the optimal portfolio for an investor? (20 marks) b) Stock

a) How is an efficient frontier constructed and how can it

a) How is an efficient frontier constructed and how can it be used to determine the optimal portfolio for an investor? (20 marks) b) Stock X has a beta of 0.60 with the relevant market return. The market return is 16%, and the market variance is 12%. Stock X has an average annual return of 13% and its variance is 9%. Using the Single Index Model, calculate the alpha and unique risk for Stock X and comment on how these measures are used in portfolio construction. (15 marks)

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