# Question

Given the multi-index model

Where I*1 and I*2 are correlated, and given the regression equation I*2 = 1 + 1.3I1 + dt, transform the equation for Ri into one with orthogonal indexes.

Where I*1 and I*2 are correlated, and given the regression equation I*2 = 1 + 1.3I1 + dt, transform the equation for Ri into one with orthogonal indexes.

## Answer to relevant Questions

Given the following data:σ2m = 10 What is the optimum portfolio assuming no short sales if RF = 5%? What is the optimum portfolio assuming short sales but no riskless lending and borrowing with p = 0.5 for all pairs of securities? Use the data in Problem 4. In Problem 4 If RL equals 5%, what is the preferred investment shown in Problem 1 using Roy’s safety-first criterion? In Problem 1 Given the data in the prior question, what is the standard deviation of return from the point of view of a U.S. investor and of a U.K. investor? Show that the standard CAPM should hold even if short sales are not allowed.Post your question

0