Portfolio Management

[IFT Team]

Please use this discussion thread to ask and discuss queries related to Portfolio Management topic.

[muhammad ali]

why do mutual funds are traded at the end of the business day ? 

[Arif Irfanullah]

I hope your studies are coming along fine.  Find attached the PM quiz and solution.  

The Equity quiz will be shared on this forum in about 2 weeks.

Make sure you do a lot of practice problems.

[anirb...@gmail.com]

Dear All, 

I have come across this practice question below. As per my understanding, the correct answer should be A. What do you think it should be?

Q. Which of the following statements best describes an investment that is not on the efficient frontier?

A) There is a portfolio that has a lower return for the same risk

B) The portfolio has a very high return

C) There is a portfolio that has a lower risk for the same return. 

Please provide the reasoning for your choice. 

Thanks. 

[Aziz Amir Ali]

And what was the answer ?

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[Sana Dadabhoy]

I think A is right

[Barak]

The correct answer is C.

The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return.

Note: In my opinion, the question is not phrased very well, as usually we consider portfolios of assets and not "Investments" on the efficient frontier diagram.

[Aziz Amir Ali]

I thought so too because A would have been too simple to be true, but just thinking out loud why would an investment be inefficient if you get ghe same return for lower risk. I LIKE HIGH OR SAME RETURNS FOR LOWERS RISKS

[Sana Dadabhoy]

C says: here is a portfolio that has a lower risk for the same return which means the portfolio is on the efficient frontier.

the question asks for a portfolio or investment NOT on the frontier...the one not on it will be higher in risk or same in risk and offering a low return.

Where is this question from and is there an answer that can be verified as opposed to the guess work

[Anirban Karmakar]

The Answer is C and has the exact explanation as stated by Barak. But my follow up Q to that explanation is the same that Aziz posted. "Why would an investment be inefficient if you get the same return for lower risk?"

The source of  the Question is a reputed coaching institute in Dubai. I just got their Q&A material. Unfortunately, I don't have access to them to clarify the response.  :(

On Monday, November 4, 2013 11:41:26 AM UTC+4, sanayd wrote:

C says: here is a portfolio that has a lower risk for the same return which means the portfolio is on the efficient frontier.

the question asks for a portfolio or investment NOT on the frontier...the one not on it will be higher in risk or same in risk and offering a low return.

Where is this question from and is there an answer that can be verified as opposed to the guess work

On Mon, Nov 4, 2013 at 12:20 PM, Aziz Amir Ali <azizam...@gmail.com> wrote:

I thought so too because A would have been too simple to be true, but just thinking out loud why would an investment be inefficient if you get ghe same return for lower risk. I LIKE HIGH OR SAME RETURNS FOR LOWERS RISKS

On 4 Nov 2013 12:16, "Barak" <her...@gmail.com> wrote:

The correct answer is C.

The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return.

Note: In my opinion, the question is not phrased very well, as usually we consider portfolios of assets and not "Investments" on the efficient frontier diagram.

On Monday, November 4, 2013 1:29:32 AM UTC+2, anirb...@gmail.com wrote:

Dear All, 

I have come across this practice question below. As per my understanding, the correct answer should be A. What do you think it should be?

Q. Which of the following statements best describes an investment that is not on the efficient frontier?

A) There is a portfolio that has a lower return for the same risk

B) The portfolio has a very high return

C) There is a portfolio that has a lower risk for the same return. 

Please provide the reasoning for your choice. 

Thanks. 

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