Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 14 percent and risk of 19 percent. The expected return and risk of portfolio Yellow are 15 percent and 18 percent; and for the Purple portfolio are 16 percent and 21 percent.
A)Portfolio Blue dominates portfolio Yellow.
B)Portfolio Yellow dominates portfolio Blue.
C)Portfolio Purple dominates portfolio Blue.
D)Portfolio Purple dominates portfolio Yellow.

Question

Quizplus · Accepted Answer

Portfolio Yellow dominates portfolio Blue because it has a higher expected return with lower risk. Portfolio Purple is not necessarily the best choice as it has the highest risk among the three portfolios.

Determine Which One of These Three Portfolios Dominates Another