a) Consider these two vectors

w1 = [0.9 0.1]? w2 = [0.5 0.5]?

and the matrix

0.1	-0.2
-0.2	0.3

Compute

1?w1 w 1 w 2? w 1? w 2 w 2? ? w 2

Could ?1 denote a vector of weights? What about ?2? Could ? denote a covariance matrix?

b) Anne Grace has a $900 000 fully diversified portfolio. She subsequently inherits ABC company common stock worth $100 000. Her financial adviser provided her with the following estimates:

The correlation coefficient of the ABC stock returns with the original portfolio returns is 0.40

	expected return	standard deviation
original portfolio	0.67%	2.37%
ABC company	1.25%	2.95%

expected return of there new portfolio which includes ABC stock covariance of ABC stock returns with the original portfolio returns standard deviation of her new portfolio which includes the ABS stock