Purchase Solution

Optimal Portfolio for an Investor

Not what you're looking for?

Ask Custom Question

Explain how a given investor chooses an optimal portfolio. Will this choice always be a diversified portfolio, or could it be a single asset?

Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation to answer the request of the assignment of more than 400 words of text.

Solution Preview

Please see attached file.

Explain how a given investor chooses an optimal portfolio. Will this choice
always be a diversified portfolio, or could it be a single asset?
The Robinson Crusoe Economy V's Capital Markets
How does a single individual choose an optimal portfolio or risky assets in a world where there are no opportunities for exchange involving risk sharing? Note the nature of the constraint here - we require individuals to exactly satisfy their wealth/budget constraints at each date in the following sense.
1. A Portfolio : Given a particular stick of wealth at any date, W, a portfolio constitutes an allocation of wealth among a number of assets, i=1,...N, such that proportion of wealth allocation to each asset (i) is
(i) i 0 : non-negative
and
(ii)
(i)above ...

Purchase this Solution
Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Operations Management

This quiz tests a student's knowledge about Operations Management

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating various parameters of a optimal risky portfolio

    464009 Portfolio Analysis: Expected Return, Optimal Risk, Standard Deviation, Minimum Variance An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%.

  • Basic financial terms and APT 2-factor models

    An efficient portfolio refers to the set of feasible portfolios of financial assets that an investor can have for either i) the greatest return expected for a certain risk level, or ii) the lowest risk for a certain expected return.

  • The James Bond Fund

    143386 Optimal Portfolio Decisions The James Bond Fund is a mutual fund (open-end investment company) with an objective of maximizing income from a widely diversified corporate bond portfolio.

  • Efficient or optimal portfolio using beta as a selection measure

    Can you as an individual investor choosing your own stock create an optimal portfolio of 99 stock (can be other securities besides stock) by selecting 33 stocks with beta equal to 1, 33 stocks with beta equal to 0.5 and 33 stock with beta equal to 2?

  • Constructing efficient frontier and optimal portfolio

    Now add a set of indifference curves to the graph created for part b. What do these curves represent? What is the optimal portfolio for this investor?

  • Economic Growth and Portfolio Analysis

    The author's intended solution allows the investor to distinguish between his own views and his expected rate of return to generate an optimal portfolio.

  • Portfolio theory

    An optimal portfolio is such that it "provides the highest return for a given level of risk or provides minimum risk for a given level of return" (Gitman, et al, 2005).

  • Portfolio Diversification and Risk

    The Sharpe ratio is calculated as the risk premium of an asset divided by its standard deviation. The portfolio with the highest possible Sharpe ratio on the opportunity set is called the Sharpe optimal portfolio.

  • MBA Question Finance: Defining Terms

    Relationship between the terms: The CAPM assumes that the risk-return profile of a portfolio can be optimized - an optimal portfolio displays the lowest possible level of risk for its level of return.

View More Related Solutions