Suppose three risky assets D, D and D3 have expected returns of 10%, 5% and 6%...

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Suppose three risky assets D₁, D₂ and D3 have expected returns of 10%, 5% and 6% respectively, and the variance-covariance matrix 4 1 3 Σ = |1 2 2 322 with Σ−1, 1 8 0 4 -4 4 1 5 5 -7 (a) In the case of combining all three risky assets D₁, D2 and D3, find the minimum variance portfolio, the expected return on that portfolio min and the minimum variance on. Assume that short sales are allowed. [5 marks] min (b) Find the equation of the efficient portfolio frontier (stating where it starts) using the formulas in- volving A,B,C and D. What kind of geometric curve is it? [5 marks] Suppose three risky assets D₁, D₂ and D3 have expected returns of 10%, 5% and 6% respectively, and the variance-covariance matrix 4 1 3 Σ = |1 2 2 322 with Σ−1, 1 8 0 4 -4 4 1 5 5 -7 (a) In the case of combining all three risky assets D₁, D2 and D3, find the minimum variance portfolio, the expected return on that portfolio min and the minimum variance on. Assume that short sales are allowed. [5 marks] min (b) Find the equation of the efficient portfolio frontier (stating where it starts) using the formulas in- volving A,B,C and D. What kind of geometric curve is it? [5 marks]

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To find the minimum variance portfolio and the efficient portfolio frontier we need to perform some calculations based on the given information a Minimum Variance Portfolio The weights of the assets i... View the full answer