Financial and Economics

Applying with the restriction of riskless lending and no riskless borrowing, question 4 aims at how this restriction affect the efficient set analyzed in question 2, 3 and 4. This restriction identify that the fund should not leverage its position and therefore it should not be allowed to borrow funds while on the other hand, it is still allowed to purchase treasury instruments.

By adding the risk-free rate, we plot the CML for each of the restriction mentioned above. Compared to the prior analyzes，by adding the restriction of lending money at the risk-free rate and no riskless borrowing, the efficient set faced by the managers shows a quite different version. The following graph provides the empirical evidence towards this target.

Applying with the restriction of riskless lending and no riskless borrowing, question 4 aims at how this restriction affect the efficient set analyzed in question 2, 3 and 4. This restriction identify that the fund should not leverage its position and therefore it should not be allowed to borrow funds while on the other hand, it is still allowed to purchase treasury instruments.

By adding the risk-free rate, we plot the CML for each of the restriction mentioned above. Compared to the prior analyzes，by adding the restriction of lending money at the risk-free rate and no riskless borrowing, the efficient set faced by the managers shows a quite different version. The following graph provides the empirical evidence towards this target.

Applying with the restriction of riskless lending and no riskless borrowing, question 4 aims at how this restriction affect the efficient set analyzed in question 2, 3 and 4. This restriction identify that the fund should not leverage its position and therefore it should not be allowed to borrow funds while on the other hand, it is still allowed to purchase treasury instruments.

By adding the risk-free rate, we plot the CML for each of the restriction mentioned above. Compared to the prior analyzes，by adding the restriction of lending money at the risk-free rate and no riskless borrowing, the efficient set faced by the managers shows a quite different version. The following graph provides the empirical evidence towards this target.