Risk tolerance Conservative investors select portfolios at the left end of the efficient frontier a Aggressive investors select portfolios at the right end of the efficient frontier
Risk Tolerance ◼ Conservative investors select portfolios at the left end of the efficient frontier. ◼ Aggressive investors select portfolios at the right end of the efficient frontier
Capital market Line (cml The efficient frontier concerned W1 portfolios of risky assets A risk-free asset increases the investment options available zero variance and a certain return zero covariance with any other asset no risk New efficient frontier- CML
Capital Market Line (CML) ◼ The efficient frontier is concerned with portfolios of risky assets. ◼ A risk-free asset increases the investment options available: ◼ zero variance and a certain return ◼ zero covariance with any other asset ◼ no risk ◼ New efficient frontier - CML