Suppose there were two portfolios known to be in the minimum variance set for a universe...
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Suppose there were two portfolios known to be in the minimum variance set for a universe of three stocks. There are no restrictions on short sales. The weights for each of the two portfolios are as follows: Portfolio 1 X (A) -0.5, X(B) 0.5, X(C) 1 Portfolio 2 X (A) 1.25, X(B) 0.25, X(C) -0.5 (i) What would the stock weights be for a portfolio constructed by investing $3,000 in portfolio 1 and $1,000 in portfolio 2? Show your calculations. (ii) Would the new portfolio in part (1) be in the minimum variance set? (iii) Suppose you combined the portfolio in part (i) with Portfolio 1 to form yet another portfolio. Would this new portfolio be in the minimum variance set? Suppose there were two portfolios known to be in the minimum variance set for a universe of three stocks. There are no restrictions on short sales. The weights for each of the two portfolios are as follows: Portfolio 1 X (A) -0.5, X(B) 0.5, X(C) 1 Portfolio 2 X (A) 1.25, X(B) 0.25, X(C) -0.5 (i) What would the stock weights be for a portfolio constructed by investing $3,000 in portfolio 1 and $1,000 in portfolio 2? Show your calculations. (ii) Would the new portfolio in part (1) be in the minimum variance set? (iii) Suppose you combined the portfolio in part (i) with Portfolio 1 to form yet another portfolio. Would this new portfolio be in the minimum variance set?
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To calculate the stock weights for the portfolio constructed by investing 3000 in Portfolio 1 and 10... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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