Investments, tenth edition

 Figure 7.11 

The efficient frontier of risky assets with the optimal CAL  

 eXcel APPLICATIONS: Two–Security Model 

 T

he accompanying spreadsheet can be used to mea-

sure the return and risk of a portfolio of two risky 

assets. The model calculates the return and risk for vary-

ing weights of each security along with the optimal risky 

and minimum-variance portfolio. Graphs are automatically 

generated for various model inputs. The model allows you 

to specify a target rate of return and solves for optimal 

combinations using the risk-free asset and the optimal 

risky portfolio. The spreadsheet is constructed with the 

two-security return data from  Table 7.1 . This spreadsheet is 

available at   www.mhhe.com/bkm.