Consider a universe of three equities with the following characteristics i. Security 1: Expected return of...
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Consider a universe of three equities with the following characteristics i. Security 1: Expected return of = 3.00% ii. Security 2: Expected return of = 4.00% iii. Security 3: Expected return of = 5.00% iv. The inverse of the variance co-variance matrix of security returns V1 is provided below 0.36 -0.09 0.03 -0.09 0.07 -0.02 0.03 -0.02 0.03 If you were to construct a frontier of efficient portfolios containing these three securities (showing your work), 1. Determine what the portfolio allocation would be to each security in the cases (8 marks) i. where portfolio expected return was 4.00% and, ii. where portfolio expected return was 8.00% Consider a universe of three equities with the following characteristics i. Security 1: Expected return of = 3.00% ii. Security 2: Expected return of = 4.00% iii. Security 3: Expected return of = 5.00% iv. The inverse of the variance co-variance matrix of security returns V1 is provided below 0.36 -0.09 0.03 -0.09 0.07 -0.02 0.03 -0.02 0.03 If you were to construct a frontier of efficient portfolios containing these three securities (showing your work), 1. Determine what the portfolio allocation would be to each security in the cases (8 marks) i. where portfolio expected return was 4.00% and, ii. where portfolio expected return was 8.00%
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