Example 1:the frontier ▣Answer: a.To=I+Bp(Fa-r) 0.16=0.06+Bn(0.14-0.06) B。=1.25 b.Since the portfolio is on the efficient frontier,it is a combination of the risk-free asset(w)and the market portfolio (1-w): 0.16=0.06w+0.141-w) w=-0.25 2010/Yichuan Liu 10Example 1: the frontier  Answer: a. rp  rf   p rm  rf  0.16  0.06   0.14  0.06 p  1.25 p b. Since the portfolio is on the efficient frontier, it is a combination of the risk‐free asset (w) and the market portfolio (1‐w): 0.16  0.06w 0.141 w w  0.25 2010 / Yichuan Liu 10