Consider three independent risky assets with variances v1 = 0:01; v2 = 0:02; v3 = 0:04 and with expected returns r1 = 10%; r2 = 20%; r3 = 30% Consider the Markowitz optimization model that forms a portfolio of the three assets with an expected return goal of 25% and with short selling allowed. Suppose that a friend says that a portfolio of the three assets with weights w1 = 0; w2 = 0:5; and w3 = 0:5 is optimal for the this Markowitz model. Prove or disprove your friend's claim.

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We can disprove your friends claim by analyzing the Markowitz model for this scenario Heres why Expe... View the full answer