Ques.)

We consider different risky portfolios consisting of two risky assets X and Y. Suppose the expected return and standard deviation of the Minimum Variance Portfolio (MVP), M, are 9.05% and 1.04%.

There are four other risky portfolios consisting of X and Y :

A) Portfolio A: E(rA) = 8:25% and Std Dev(A) = 1:10%.

B) Portfolio B: E(rB) = 9:20% and Std Dev(B) = 1:05%.

C) Portfolio C: E(rC) = 8:70% and Std Dev(C) = 1:05%.

D) Portfolio D: E(rD) = 8:53% and Std Dev(D) = 1:06%.

(1) Please plot and label the four risky portfolios and the MVP in a coordinate plane with

y-axis being E(r) and x-axis being Std Deviation (Sigma Sign).

(2) Which of the portfolio(s) is(are) on the efficient frontier? Why?