Question: Expected return (%} A B C D E F G H ll anaaaaaul Standard deviation (%) Plot these portfolios on a graph where the x

Expected return (%} A B C D E F G H ll anaaaaaul Standard deviation (%) Plot these portfolios on a graph where the x axis is the standard deviation and the y axis is the return. Five of the portfolios are efficient, and three are not. Which are the inefficient ones? Explain. Suppose you are prepared to tolerate a standard deviation of 25 percent on your portfolio. What is the maximum expected return that you achieve if you cannot borrow or lend? What is your optimal strategy if you can borrow or lend at 12% and are prepared to tolerate a standard deviation of 25 percent. What is the maximum expected return that you can achieve? (Hint: think CML)

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