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.

a) For portfolios constructed with and without short selling from the three securities compute the minimum variance line parameterised by the expected return.

b) Sketch the MVL on the w2, w3 plane;

c) Point out on the MVL the set of all feasible portfolios with and without short selling.