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 13 percent and risk of 17 percent. The expected return and risk of portfolio Yellow are 15 percent and 19 percent; and for the Purple portfolio are 12 percent and 18 percent.
A) Portfolio Blue dominates portfolio Yellow.
B) Portfolio Blue dominates portfolio Purple.
C) Portfolio Purple dominates portfolio Blue.
D) Portfolio Purple dominates portfolio Yellow.

Question

Quizplus · Accepted Answer

Portfolio Blue dominates Portfolio Purple because it has a higher expected return (13% vs. 12%) with a lower risk (17% vs. 18%).

Determine Which One of These Three Portfolios Dominates Another