R=a + BRM +E, we can suggest a long-short portfolio with the following weights: WV. in AAPL, (1 W)Vo in SPY where Vo is the initial fund available for investment. (a) (1 point) Show that the expected return of the portfolio is wa + (1 W + wBHM (b) (2 points) Assuming Var(e) = o and Var(RM) = om, derive the return variance of the long-short portfolio as a function of w. (c) (5 points) Show that W*-_(1 B)02 o+(1 )2OM will minimize the return variance of the portfolio. Verify that it is indeed a minimum variance and compute the value of the return variance. How is this variance compared to o and oM? R=a + BRM +E, we can suggest a long-short portfolio with the following weights: WV. in AAPL, (1 W)Vo in SPY where Vo is the initial fund available for investment. (a) (1 point) Show that the expected return of the portfolio is wa + (1 W + wBHM (b) (2 points) Assuming Var(e) = o and Var(RM) = om, derive the return variance of the long-short portfolio as a function of w. (c) (5 points) Show that W*-_(1 B)02 o+(1 )2OM will minimize the return variance of the portfolio. Verify that it is indeed a minimum variance and compute the value of the return variance. How is this variance compared to o and oM