L
lucky999
Member
The examiners answer for this says:
"At the point of tangency, the portfolio is a diversified one without risk-free
assets. To the left of the point of tangency, the portfolios will have a mix of
diversified assets and risk-free assets. To the right of the point of tangency,
the portfolios will consist of more than 100% diversified assets, as the investor
would have borrowed at risk-free rate and invested in diversified assets."
BUT in Chapter 6, page 5 of the CMP notes, it says
"All rational investors will hold a combination of the risk-free asset and the portfolio of risky assets at the point of tangency".
So how come the examiner answer does not have the risk-free asset at the point of tangency?
"At the point of tangency, the portfolio is a diversified one without risk-free
assets. To the left of the point of tangency, the portfolios will have a mix of
diversified assets and risk-free assets. To the right of the point of tangency,
the portfolios will consist of more than 100% diversified assets, as the investor
would have borrowed at risk-free rate and invested in diversified assets."
BUT in Chapter 6, page 5 of the CMP notes, it says
"All rational investors will hold a combination of the risk-free asset and the portfolio of risky assets at the point of tangency".
So how come the examiner answer does not have the risk-free asset at the point of tangency?