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Final

RSM332H1 Final: M Final Review


Department
Rotman Commerce
Course Code
RSM332H1
Professor
Kevin Wang
Study Guide
Final

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Lecture 7Modern Portfolio Theory
IMPT allows youto find the optimal portfolioto achieve
the highestpossible expected return for agiven level ofhis k
dTwoRiskyStocks Care CA B
EERepIWA ECRA tWB El RB
Op Was
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OB
22WAWBTAB
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RAB
lower Pbetter alower risk to getagiven level of return
Minimum Variance PortfolioLMVP
7
min of WETA't llWAY
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P
AB
WA
owamn.E.IE o
lowestrisk lowestexpected return Fa9HEkF Eeas
offer
given
levelofrisk
buthigher
expected return

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3NRiskyAssets
BAi lower risk lower return
ABi higherrisk higherreturn
4NRisky 9Risk free
If risk free Rf oof o
ELRpt wan.EC2nn Cl Wna Rf kftWnnlECRnn Rf
Op _fWooton Oto WanOhn
Wan 0Sharpe ratio J
cant Risk premium
EERp Rf Eckml Rt op
arrunrunnEMurun Standard deviation
ftp.maximize Elk givenlevelofrisk steepest line
chighertsharperatio
tangent hubinvestfecarlthAE
portfolio atangentportfolio
3Tps3riskfree Eap T
4possible to have 0volatility

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BEYinvest in Mand borrow at rate Rf higher return
investpositive amount in Rfand Mlower return than
market portfolio
5Finn lipids
UECRp Kopf
ElKp Edi Elki LI Efi Rf
Qi fractionofwealthinvested in asset i
2EERi Rf
Toi
Wie Corl Ri Rm fractionofcompanyiover entire market
Oi
2wi
ERi Rf Cov Ri Rna Toi omfi.mn
whiffrisk
amount
compensation per unit of risk
tf's friskyasset is jEifork
Elkil Rt Ecki Rf
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Huff i'I'd j'E in compensation
IntraEmbuyiselly
FEY ij
WI El RE TAB El Rae1052
ELRE LOAB 052 FRptLOA TAB
EIRE EERA Rf EIRE EERB Rf
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