Question: Question (b): Find another efficient portfolio by setting = 1 and = 0 in the equations of Markowitz model, and then determine the standard deviation

Question (b): Find another efficient portfolio by setting = 1 and

Question (b): Find another efficient portfolio by setting = 1 and = 0 in the equations of Markowitz model, and then determine the standard deviation of the return on the portfolio. Find w₁ , w₂ , w₃, E(r) and , w3 , E(r) and . Question (c): Assume in addition that .

Question (c): Assume in addition that there is a risk-free asset with rate r_f = 0.4. (Shorting is allowed.) Find the efficient portfolio of risky assets. Find w₁ , w₂ and w₃.

There are just three risky assets with expected rates of return E(ra) = 7, E(ra) = 10 and Erz) = 16, respectively, and variances of the returns 012-8. 622=12, and 032=18. Assume that the returns of these assets are uncorrelated. (Keep all your answers to 4 decimal places, e.g. xx.1234.) (b) Find another efficient portfolio by setting 2 = 1 and u = 0 in the equations of Markowitz model, and then determine the mean and standard deviation of the return on the portfolio. wi: w2 w3 (no need to keyin) E(1): o: (C) Assume in addition that there is a risk-free asset with rate r;=0.4. (Shorting is allowed.) Find the efficient portfolio of risky assets. W1 w2: w3 (no need to keyin) There are just three risky assets with expected rates of return E(ra) = 7, E(ra) = 10 and Erz) = 16, respectively, and variances of the returns 012-8. 622=12, and 032=18. Assume that the returns of these assets are uncorrelated. (Keep all your answers to 4 decimal places, e.g. xx.1234.) (b) Find another efficient portfolio by setting 2 = 1 and u = 0 in the equations of Markowitz model, and then determine the mean and standard deviation of the return on the portfolio. wi: w2 w3 (no need to keyin) E(1): o: (C) Assume in addition that there is a risk-free asset with rate r;=0.4. (Shorting is allowed.) Find the efficient portfolio of risky assets. W1 w2: w3 (no need to keyin)

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