Following is the list of possible portfolio’s with their respective return and risk (SD) with at least one portfolio from the efficient frontier. Which of the following portfolio’s surely will not fall on the efficient frontier?
| Portfolio | Return | Risk | Portfolio | Return | Risk | Portfolio | Return | Risk |
| A | 12 | 8 | D | 13 | 7.5 | G | 6 | 6 |
| B | 10 | 7 | E | 12 | 7 | H | 15 | 8 |
| C | 11 | 6 | F | 10 | 5.5 | I | 11 | 7 |
Ans: C
Portfolio A B G and I are the portfolios which are surely not on the efficient frontier. To find out portfolios not on the efficient frontier, simply compare risk and return of sidewise portfolio and if portfolio offers lesser return or higher risk compared to other portfolios then it is not on the efficient frontier. Don’t try to find out portfolios on efficient frontier (this process will consume more time.
For Example, compare A and D. D offers higher risk for lower risk compared to A. Hence, we can make sure A is not on the efficient frontier. If we compare C and F, F offers both lower return and risk compared to C and hence we cannot reject C or F both. Using this process, we will be left with C D E F and H which may or may not be lying on efficient frontier but we can’t say for sure that these are not on the efficient frontier.
Margin Call (2011) Reason To recommend: Movie starts from the Risk management department of investment bank and revolves around forecast made by risk management and the decisions taken by board of investment bank. After watching this movie, you will understand the importance of risk management department. Related FRM Topic: General Risk Management Profession (No direct
Using the following table providing different factors like interest rate, storage cost, dividend yield, calculate forward price. Assume Underlying price of $1000 for all cases. Type of underlying Interest rate(CC) Storage cost Dividend Lease(L)/ CY Time to maturity Forward price Stock 5% – – – 6M Commodity 6.5% – – – 3M Stock
Click here to know more about FRM Books and Self Study Packages
FRM Part I Learning Objectives 2021 Information is collected from GARP.org B1 Foundations of Risk Management – 20% Chapter 1. The Building Blocks of Risk Management After completing this reading, you should be able to: Explain the concept of risk and compare risk management with risk Evaluate, compare and apply tools and procedures used to
FALCON EDUFIN is leading FRM, CFA and CA Final exam preparation provider. With our unique approach we help students succeed in their exam.
Give Us A Call
Drop Us a Mail
Office Location
GARP® does not endorse, promote, review, or warrant the accuracy of the products or services offered by Falcon Edufin of FRM®-related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to Falcon Edufin, nor is GARP® responsible for any fees or costs of any person or entity providing any services to Falcon Edufin. FRM®, GARP®, and Global Association of Risk Professionals™ are trademarks owned by the Global Association of Risk Professionals, Inc.
