(2) Non-linear and Non-smoothing Optimization: Stocks A, B, and C have expected returns of 7%, 6%, and 10%, respectively and the following variance-covariance matrix- A B C A 0.1 B 0.001 0.04 C 0.001 -0.04 0.08 (a) Determine the fraction of portfolio to hold in each stock so as to minimize the variance of the portfolio subject to a minimum expected return of the portfolio of 8%. (10 points) (b) Can the variance of the portfolio be smaller than the variance of any individual stock? Explain. (10 points) (C) Find the optimal portfolio if the minimum expected returns for 7% and 9%. Also, plot a curve to show the relationship between expected return and variance (15 points). (2) Non-linear and Non-smoothing Optimization: Stocks A, B, and C have expected returns of 7%, 6%, and 10%, respectively and the following variance-covariance matrix- A B C A 0.1 B 0.001 0.04 C 0.001 -0.04 0.08 (a) Determine the fraction of portfolio to hold in each stock so as to minimize the variance of the portfolio subject to a minimum expected return of the portfolio of 8%. (10 points) (b) Can the variance of the portfolio be smaller than the variance of any individual stock? Explain. (10 points) (C) Find the optimal portfolio if the minimum expected returns for 7% and 9%. Also, plot a curve to show the relationship between expected return and variance (15 points)