cracking true or false question

sarah_connor · June 5, 2009, 2:18pm

Individual securities do not lie on the CML or the Markowitz efficient frontier. true or false?

tigas · June 5, 2009, 2:23pm

true

sarah_connor · June 5, 2009, 2:24pm

Thats what I thought… BUT…wont an individual security that offers the HIGHEST possible return plot on the efficient frontier?

tigas · June 5, 2009, 2:32pm

hmmmm, can’t give a precise answer…individual securities are inefficient “portfolios” that’s the way i see it

sarah_connor · June 5, 2009, 2:37pm

but the efficient frontier’s ‘end points’ have to be the assets offering the lowest and highest returns… I need to STOP!!

tigas · June 5, 2009, 2:39pm

sarah, take a good hour of sleep after lunch if possible…i did it and even so i continue to feel very near to burn out mode…not a good prosect for tomorrow…

Chuckrox8 · June 5, 2009, 2:50pm

Individual securities do not plot on the CML, entire portfolios plot on the CML. The same applies for the efficient frontier. The CML is a straight line because you can lend and borrow to create an optimal portfolio whereas you cannot on the efficient frontier.