could you help me ecpecially question 4 I don't know how to solve it

VPM (MSF 504) Homework 1: Due September 14 This is your only non-group homework assignment. Answer the questions below neatly. You will have to use Excel (or something cooler) to answer questions 4 and 5. I want a hardcopy turned in at the beginning of class on September 14. 1. Write out the algebraic formula for the variance of a three-ass portfolio, i2 Var ri 2. Show that and w w i j Cov ri , r j , and wi , with is a portfolio weight. yields the same answer as you got in problem 1, for , w1 12 w w2 12 w 13 2 3. Var w1 r1 w 2 r2 w3 r3 , and 1 2 13 22 2 3 2 3 32 is the transpose of w. w Given a vector of Expected ReturnsNOT Excess Returns R n1 , and covariance matrix nn , find the formula for the utility maximizing portfolio that solves Max w w R 1 2 for A = risk aversion coefficient and e = an A w w n 1 vector of 1's. s.t. w e 1 4. Assume an investor has a coefficient of risk aversion, A = 2, then use the information in the table below, along with Excel (and your formula you derived in question 3), to find i) ii) iii) Asset AAA BBB CCC DDD EEE 5. the utility maximizing portfolio weights the expected return of the portfolio the volatility of the portfolio E(R) 3.00% 7.00% 15.00% 14.00% 20.00% AAA BBB CCC DDD EEE AAA Covariance Matrix BBB CCC DDD EEE 0.30 0.10 0.20 0.08 0.10 0.10 0.25 0.10 0.10 0.20 0.20 0.10 0.36 0.10 0.22 0.08 0.10 0.10 0.60 0.20 0.10 0.20 0.22 0.20 0.40 How do your answers change for an investor with a risk-aversion coefficient A = 10? (Compare portfolio weightings, expected returns, and volatility.) Do these changes make economic sense? How