archived_user
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- Jun 18, 2026
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Hello guys,I want to know if I understood correctly the difference between example 9&10 and why we did not use corners portfolio in 10.
in example 9
1) the tangency portfolio (P5 with the highest SR) return (6,47) was below the return objective of the investor (8,5) thus it was impossible to reach the desired return without using margin which is not permitted by the IPS
in example 10
1)The tangency portfolio (P4 with the highest SR) return is acceptable
2) T-bill is an acceptable asset class
Consequently we can use the CML ( linear combination of P5 and T-bill) to build a portfolio with superior SR
a portfolio with ( 0,85% P4) satisfy The risk and return objectives.
But when comparing their SRF,as it is stipulated in the IPS, It appears that 100%P4 has a better SFR ratio
did I understood correctly the difference between example 9 & 10 ?
in example 9
1) the tangency portfolio (P5 with the highest SR) return (6,47) was below the return objective of the investor (8,5) thus it was impossible to reach the desired return without using margin which is not permitted by the IPS
in example 10
1)The tangency portfolio (P4 with the highest SR) return is acceptable
2) T-bill is an acceptable asset class
Consequently we can use the CML ( linear combination of P5 and T-bill) to build a portfolio with superior SR
a portfolio with ( 0,85% P4) satisfy The risk and return objectives.
But when comparing their SRF,as it is stipulated in the IPS, It appears that 100%P4 has a better SFR ratio
did I understood correctly the difference between example 9 & 10 ?