Question: 10. (Markowitz fun. There are just three assets with rates of return 11, 12 and r3, respec- tively. The covariance matrix and the expected rates

10. (Markowitz fun. There are just three assets with rates of

10. (Markowitz fun. There are just three assets with rates of return 11, 12 and r3, respec- tively. The covariance matrix and the expected rates of return are 0 = 2 1 -- 0.4 0.8 0.8 9 0 2 (a) Find the minimum-variance portfolio. What is u in this case? (b) Find the optimal portfolio with i = 0.7 directly (i.e., without using the Two Fund Theorem. (c) Find another efficient portfolio by setting 1 = 1, 0, and thus the optimal portfolio with an expected rate of return 1 by the Two Fund Theorem. (d) If the risk-free rate is rp = 0.1, then find the efficient portfolio of risky assets that is required by One-Fund Theorem. = =

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