26. Consider the following three risky assets. [ 1 [0.12] expected return = H2 = 0.15,...
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26. Consider the following three risky assets. [ 1 [0.12] expected return = H2 = 0.15, standard deviation = L3. 01 [0.25] 02 = 0.20 [03] [0.25] 10.201 and correlation matrix = [Pij]ij 1 0.1 0.21 = 0.1 1 0.5 L0.2 0.5 1 2. Calculate the expected return and the standard deviation of the portfolio of the three assets where (1) w =0.5, W2 = 0.3, and w3 = 0.2 (2) W =-1, W2 = -1, and w3 = 3 3. Suppose you want to construct a portfolio of the three assets whose expected return (up) is 0.18. Find the portfolio weights that minimize its standard deviation analytically. Shorting is allowed. You need to show your work. 6. Suppose the risk-free rate is 0.05. Find the efficient portfolio of the risky assets. In order words, find the one fund. 26. Consider the following three risky assets. [ 1 [0.12] expected return = H2 = 0.15, standard deviation = L3. 01 [0.25] 02 = 0.20 [03] [0.25] 10.201 and correlation matrix = [Pij]ij 1 0.1 0.21 = 0.1 1 0.5 L0.2 0.5 1 2. Calculate the expected return and the standard deviation of the portfolio of the three assets where (1) w =0.5, W2 = 0.3, and w3 = 0.2 (2) W =-1, W2 = -1, and w3 = 3 3. Suppose you want to construct a portfolio of the three assets whose expected return (up) is 0.18. Find the portfolio weights that minimize its standard deviation analytically. Shorting is allowed. You need to show your work. 6. Suppose the risk-free rate is 0.05. Find the efficient portfolio of the risky assets. In order words, find the one fund.
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