Dominant Portfolios 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 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 only slightly higher risk. Portfolio Purple does not dominate either Blue or Yellow as it has a lower expected return than Yellow and a higher risk than Blue.

Dominant Portfolios Determine Which One of These Three Portfolios Dominates