Question: Exercise 1. You are a mean-variance optimizer with A = 2. There are two risky assets and one risk-free asset. E[ra] = .08, E[r b]

Exercise 1. You are a mean-variance optimizer with A = 2.

Exercise 1. You are a mean-variance optimizer with A = 2. There are two risky assets and one risk-free asset. E[ra] = .08, E[r b] =.06, Var[ra] = .10, Var[rb] = .03, and rf = .03. Compute the optimal portfolio three times with Corr(ra, rB) equal to -.5, 0, and .5. Discuss the results. Exercise 2. Suppose there exists two stocks, A and B, and the market index, M. Suppose the values for the market and stock A and B are E[RM] = 0.06, E[RA] = 0.01, E[RB] = 0.11, Var(RM) = 0.12, Var[RA] = 0.10, Var[RB] = 0.22, Cov[RA, Rm] = 0, Cov[RB, Rm] = 0.12. What are the a, b, and o for each of the stocks? Exercise 1. You are a mean-variance optimizer with A = 2. There are two risky assets and one risk-free asset. E[ra] = .08, E[r b] =.06, Var[ra] = .10, Var[rb] = .03, and rf = .03. Compute the optimal portfolio three times with Corr(ra, rB) equal to -.5, 0, and .5. Discuss the results. Exercise 2. Suppose there exists two stocks, A and B, and the market index, M. Suppose the values for the market and stock A and B are E[RM] = 0.06, E[RA] = 0.01, E[RB] = 0.11, Var(RM) = 0.12, Var[RA] = 0.10, Var[RB] = 0.22, Cov[RA, Rm] = 0, Cov[RB, Rm] = 0.12. What are the a, b, and o for each of the stocks

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