Intuition Questions After receiving a corrected analytical solution, should you then proceed with answering the intuition questions below to prepare for the meeting with the client. 1. Your client asks what the benefit is of combining the two portfolios to arrive at the optimal risky portfolio. Include in your explanation why the resulting portfolio that includes A & B has a higher Sharpe Ratio compared to Portfolio (A) or (B) by itself. Prepare a clear & concise response to your client. 2. Your client believes in the weak-form of market efficiency as it relates to security selection. Does Portfolio As performance provide sufficient justification to prove or disprove conclusively your clients belief that markets are weak-form efficient? Why or why not? 3. After further discussions with your client, it turns out that she believes markets are semi-strong form efficient as it relates ONLY to stock selection, what portfolio

substitution(s) would you make to the recommended optimal risky portfolio and why? No calculations are necessary. 4. After meeting with the client, she informs you that she prefers a return higher than that of the optimal risky portfolio and is willing to accept the higher corresponding risk. a. Is it possible to achieve such a portfolio and if so, how would this be implemented? b. What does that indicate about your initial assumption(s) regarding the indifference curve? 5. Portfolio A returned 9.20% p.a. over the evaluation period compared to 5.00% p.a. for the S&P 500. This equates to a difference, or outperformance of 4.20% p.a. However, according to CAPM, the annualized alpha of portfolio A is 4.74% p.a. Explain the difference between the two numbers. (Note: It is not due to rounding) Upload the completed intuition questions in Canvas under Case Study Intuition Questions. One submission per group.