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 7 percent and risk of 10 percent. The expected return and risk of portfolio Yellow are 13 percent and 10 percent; and for the Purple portfolio are 9 percent and 14 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 the same risk (10 percent) but a higher expected return (13 percent versus 7 percent).

Determine Which One of These Three Portfolios Dominates Another