Question 2 Given three securities Expected Return Standard Deviation Correlation of Returns Stock 1 Stock 2 Stock 3 Stock 1 0 15 0 20 1 00 0 20 0 30 Stock 2 0 20 0 30 1 00 0 80 Stock 3 0 08 0 10 1 00 (c) Suppose the risk free rate is 5 Someone claims you that an equally weighted portfolio of Stocks 1 to 3 is the tangency portfolio of these three stocks Do you believe his claim Justify your answer

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Question: Question 2: Given three securities: Expected Return Standard Deviation Correlation of Returns Stock 1 Stock 2 Stock 3 Stock 1 0.15 0.20 1.00 0.20 0.30

Question 2:

Given three securities:

	Expected Return	Standard Deviation	Correlation of Returns Stock 1 Stock 2 Stock 3
Stock 1	0.15	0.20	1.00	0.20	0.30
Stock 2	0.20	0.30		1.00	0.80
Stock 3	0.08	0.10			1.00

(c) Suppose the risk-free rate is 5%. Someone claims you that an equally weighted portfolio of Stocks 1 to 3 is the tangency portfolio of these three stocks. Do you believe his claim? Justify your answer.

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