Every long-only mix of four composite stocks, scored in 1 percent steps, traces the frontier drawn in this Unit 4 efficient frontier exercise from MT422. Searches like "mt 422 unit 4 assignment example", "mt422 unit 4 sample" and "mt422 unit 4 example" land here.
What a finished MT422 Unit 4 efficient frontier exercise looks like
Five pages, with an assumptions table, a scatter of every portfolio and the frontier drawn over it. Supplied assumptions give the RV maker an 11 percent expected return and 28 percent deviation, a freight broker 10 and 24, the dollar-store chain 8 and 15, and a dental-supply distributor 7 and 13, with pairwise correlations from 0.15 to 0.55 and a [4.0] percent bill rate. The minimum-variance portfolio holds 54 percent in the distributor and 36 in the chain for 11.18 percent risk and a 7.70 percent return. The tangency portfolio, 43 percent chain, 25 distributor, 17 RV maker and 15 freight broker, returns 8.56 at 12.43 risk. At a 10 percent target the distributor drops out entirely. Equal weights earn 9.00 percent at 14.29 risk, 0.53 points more than the frontier needs.
How a MT422 Unit 4 example is structured
Assumptions come first and are labeled as supplied inputs, since an efficient frontier is only as good as the expected returns fed into it. The method section states the constraint set, weights summing to one with no short sales, and the search: 176,851 portfolios scored on expected return and deviation through the full covariance matrix. The frontier is then read from the scatter as the upper edge above the minimum-variance point, and the lower edge is named as inefficient. Composition across the frontier is tabulated at five targets, showing the low-risk distributor giving way to the RV maker as the target rises. The capital allocation line follows, drawn from the bill rate through the tangency point, and the paper notes that a 10 percent risk level sits below every stock-only portfolio and is reachable only by holding bills beside the tangency mix.
Inputs labeled as assumptions
Expected returns, deviations and six correlations for four composite stocks, plus a bracketed bill rate, each marked as supplied rather than estimated.
Every long-only mix scored
176,851 weightings in 1 percent steps, each run through the covariance matrix, form the cloud the frontier is read from.
Two named points
Minimum variance at 11.18 percent risk and a 7.70 return; tangency at 12.43 and 8.56, with a Sharpe ratio of 0.367.
Composition as the target rises
The distributor's weight falls from 54 percent to zero by a 10 percent target, while the RV maker climbs toward nearly the whole portfolio.
An equal-weight mix, inside
Nine percent return at 14.29 risk, against 13.76 on the frontier for the same return, stated as the price of naive weighting.
Where marks go in MT422 Unit 4
Frontiers sketched by hand through a few plotted stocks miss the shape the exercise is built to show. Correlations left out of the calculation, with portfolio risk taken as a weighted average, flatten the curve into a straight line and cost the most method credit. Graders also check the constraint: allowing short sales without saying so produces a different frontier, and an unlabeled one cannot be compared. The lower half of the curve presented as efficient suggests the concept has been confused with the minimum-variance set. Tangency portfolios reported without the bill rate that defines them cannot be verified. Reading the output as a forecast of what these weights will earn, rather than as a consequence of assumed inputs, overstates what the exercise proves; small input changes can move the weights a long way.
Get a MT422 Unit 4 example written to your instructions
Asset lists vary: some Unit 4 prompts supply three funds, others ask for historical data on chosen stocks. Either way the free first MT422 frontier exercise is computed from the full covariance matrix, charted with its named points and written to the rubric, arriving within 24-48h. A Solver-based version in Excel can be requested instead of a grid search.
MT422 Unit 4 questions, answered
Can I use Excel Solver for the frontier?
Yes, and it is the tool most sections anticipate. Run Solver once per target return, minimizing deviation with weights summing to one and, unless shorting is allowed, no negative weights. Report the settings, since a reader needs the constraints to reproduce the curve. A grid search reaches the same frontier and is easier to explain, at the cost of more computing.
Why does the riskiest stock still get weight at low targets?
Because its correlation with the others is low enough that a small position reduces portfolio risk, or adds return for very little extra risk. Weight follows contribution to the whole, not standalone deviation. Here the RV maker holds 4 percent even in the minimum-variance mix, and saying why shows the frontier has been understood rather than just produced.
Do I have to include a risk-free asset?
Only if the prompt asks for the tangency portfolio or a capital allocation line, which many do by this point in the term. Adding one changes the question from which risky mix is efficient to which single risky mix is best combined with bills. State the rate used and its date, since the tangency point moves when it changes.