Question: QUESTION 3 Optimize again (with the risk-free asset) and find the weights on the asset classes in an efficient portfolio with an expected return of


QUESTION 3 Optimize again (with the risk-free asset) and find the weights on the asset classes in an efficient portfolio with an expected return of 8%. a. Compute a new set of weights for the risky asset classes by dividing the weight of each asset class in the portfolio by the sum of the weights ONLY on the risky asset classes (without the risk-free asset). In other words, you need to find the weight of the investment in an asset class relative only to investments in risky securities. Note: the sum of the new weights that you calculate should be one. Write down the new weights. b. Do the same for the weights on the risky asset classes that you got in (2.a). C. Compare the new set of weights in (3.a) and (3.b) above. Can you explain why these weights should be the same or different
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
