a) What values would Z and L assume if asset D is the risk-free asset.

b) Calculate W given that it has the same Sharpe ratio as asset A.

c) Calculate the weights of the global minimum-variance portfolio formed by assets A and E only. Show the formula you used and the working out.

d) Indicate the approximate weights of the market portfolio involving assets A and E only. You don’t need to calculate them (or show any formulas), just providing the approximate values is sufficient, but explain how you obtained it.

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Consider the information on the 5 following assets: C D Table 1 Table 2 Correlations A E Asset A B с D E A 1 -0.1 -0.4 L 0.2 B 1 0.8 X 0.6 E(R) 4.00% 5.50% K 0.50% 2.50% C 1 Y -0.9 D - 1 0.2 sd(R) 6.00% W 4.50% Z 4.00% E 1 Table 1 contains information on expected returns and standard deviations for each asset and table 2 illustrates all the correlations (for example, PCE -0.9). Some information, represented as K, L, X, Y, W and Z have been purposefully hidden. Consider the information on the 5 following assets: C D Table 1 Table 2 Correlations A E Asset A B с D E A 1 -0.1 -0.4 L 0.2 B 1 0.8 X 0.6 E(R) 4.00% 5.50% K 0.50% 2.50% C 1 Y -0.9 D - 1 0.2 sd(R) 6.00% W 4.50% Z 4.00% E 1 Table 1 contains information on expected returns and standard deviations for each asset and table 2 illustrates all the correlations (for example, PCE -0.9). Some information, represented as K, L, X, Y, W and Z have been purposefully hidden.

Answer rating: 100% (QA)

a If asset D is the riskfree asset then its expected return L must be ve... View the full answer