Question: 5. Suppose there are 4 assets whose returns have pairwise correlations that are all equal, Corr(ri, r;) = 1, i=j, p, i j. Then

5. Suppose there are 4 assets whose returns have pairwise correlations that are all equal, Corr(ri, r;) = 1, i=j, \p, i j. Then the correlation matrix is given by with eigenvectors C = P P P P P P -0-8-9-0 V2 (a) What are the eigenvalues of C? (b) What is the trace of C? (c) What is the determinant of C? (d) What are the allowed values of p for C to be a valid correlation matrix? (Hint: recall that a correlation matrix is always positive semi-definite.)

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