There are several risky assets. Which of the following does not lie on the minimum-variance frontier?

Question

BlackTom AI · Accepted Answer

The question asks which asset does not lie on the minimum-variance frontier among several risky assets. However, the provided data for answer options is missing; there are no option statements to evaluate.

What we would normally do in such a scenario is:
- Present each candidate option verbatim and assess whether its coordinates (expected return, volatility, and any given or implied pairwise correlations) place it on the minimum-variance frontier.
- For each option, determine if a portfolio that combines this asset with other assets could achieve a lower variance for the same or higher return, which would indicate the asset does lie on the frontier; conversely, if there exists a combination of other assets yielding the same return with lower variance, the asset would not lie on the frontier.
- Consider the impact of diversification: an individual asset can lie on the frontier if it is itself an efficient portfolio (i.e., no other combination of assets achieves a higher return for the same or lower risk, given the constraints).

Without the actual list of answer options, we cannot perform the necessary comparisons or identify which asset is not on the frontier. The statement in the provided answer field—“Asset 3: Expected return = 5%, volatility = 6%”—cannot be evaluated for correctness without knowing:
- the returns and volatilities of the other assets,
- the correlations among the assets,
- the full set of choice statements intended for comparison.

If you can supply the complete set of answer options, I can walk through each option, explain why it would or would not lie on the minimum-variance frontier, and clearly indicate why the given asset (Asset 3 with 5% return and 6% volatility) is or is not on that frontier, with step-by-step reasoning and distinct phrasing for each option.

BUSFIN 4221 AU2025 (2487) Practice Quiz 2

There are several risky assets. Which of the following does not lie on the minimum-variance frontier?

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