Question: On the minimum-variance frontier, a portfolio with a higher return and lower variance must be an inefficient portfolio. Briefly discuss with CAPM theory. 2. a)

  1. On the minimum-variance frontier, a portfolio with a higher return and lower variance must be an inefficient portfolio. Briefly discuss with CAPM theory.

2.

a)Briefly explain the process of short-selling a stock.

b)In theory, what is the maximum loss of short-selling a stock?

c)In theory, what is the maximum gain of short-selling a stock?

3.Suppose CAPM holds. Is there a way to identify those investors who are more risk-averse? Briefly explain.

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