Question: Consider three securities with expected returns 1 = 0.16, 2 = 0.13, 3 = 0.13, standard deviations of returns 1 = 0.25, 2 = 0.28,

Consider three securities with expected returns 1 = 0.16, 2 = 0.13, 3 = 0.13, standard

deviations of returns 1 = 0.25, 2 = 0.28, 3 = 0.20, and correlations between returns 12 = 0.30, 23 =0.00, 31 = 0.15. For portfolios constructed with and without short selling from the three securities compute the minimum

variance line parameterised by the expected return. In other words, find a and b such that w = a + b.

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