Question: j A B You have three risky assets A, B, and C: 01 E(r;) PAJ PB.j Pcj 0.06 0.14 1 0.5 0.2 0.03 0.08

j A B You have three risky assets A, B, and C:

j A B You have three risky assets A, B, and C: 01 E(r;) PAJ PB.j Pcj 0.06 0.14 1 0.5 0.2 0.03 0.08 0.5 1 0.4 0.15 0.20 0.2 0.4 1 There is also a risk-free asset with return 5%. a) Determine the weights of each of the three assets in the tangency portfolio. What is the economic interpretation of this portfolio in the mean-variance framework? b) Find analytically the equation for the line at which all efficient portfolios are located. What is the interpretation of its slope?

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