Doubts

In-class lecture 05 - Exercise 4d

Re: In-class lecture 05 - Exercise 4d

by Julio Crego -
Number of replies: 0
Yes, that is the standard way.

For those who know derivatives, the derivative of the CML is just 1/3. The derivative of the efficient frontier is:

\( \dfrac{a}{2\sqrt{\sigma-0.09}}\equiv \dfrac{a}{2x}\)

Therefore, the equality of slopes implies that:

\(\dfrac{a}{2x}=\dfrac{1}{3}\Rightarrow x=\dfrac{3}{2}a \)

which is equivalent to set the discriminant to 0.