Question 6. (10 marks)
Figure 6.1












From Figure 6.1 shown above answer the following questions:
a) What entity is represented on the ‘X-axis’?
b) What entity is represented on the ‘Y-axis’?
c) What does the ‘Curve Line’ represent?
d) What does the ‘Straight Line’ represent?
e) Identify, by a label in the diagram, an inefficient portfolio.
f) Identify, by a label in the diagram, an impossible portfolio.
g) Identify, by a label in the diagram, a low risk, low return optimal portfolio
h) What is represented by the point labelled ‘A’?
i) Why is the straight line considered to be better than the curve line?
j) How would you identify all the optimal portfolios on this graph?