Asset Allocation Optimization Question from CFAI

[cfa_mixer]

hello friends, I have a mixer for you below.
In the CFAI Asset Allocation book in the optimization subchapter (6) there are two blue box problems right next to each other (examples 9 & 10).
The first question in example 9 basically requires you to find the optimal weights between two corner portfolios.
In example 10, the question is similar, but the solution requires you to find the optimal weights between a corner portfolio and a T bill allocation.
How are you supposed to differentiate where to run the optimal weight formula, when I was doing example 10, I also did an optimization between 2 corner portfolios rather than 1 corner portfolio and tbills.
Let me know if there are specific things that are written in the question that are supposed to trigger this.

 

[IsThereAny]

If I remember correctly (which I may not), if there is a non-negative weight constraint (not allowed to short) then you should optimize using 2 corner portfolios. If there is no constraint, then optimize using a corner portfolio and shorting T-bills.

 

[S2000magician]

If they give you a risk-free asset, you should use it. Recall from Level I that the CML lies above the efficient frontier (except at the tangency point).

 

[cpk123]

they specifically determined in example 10 - that CP4 appears to be the Min Variance portfolio among the list of portfolios provided.
Also in the middle of the passage - they do mention in italics

Quote:Thus another portfolio that we might consider is the portfolio that minimizes standard deviation subject to meeting the return objective. To minimize risk without lowering the Sharpe ratio, we can combine the tangency portfolio with T-bills to choose a portfolio on CEFA’s capital allocation line. (We would lower the Sharpe ratio if we combined Corner Portfolio 4 with Corner Portfolio 5.)

So look for things that talk about - a) not reducing the Sharpe Ratio or b) working with a roy’s safety first ratio or some such constraint. (and if any of these are mentioned - use the T-Bill + approach.