Suppose we have three stocks: A, B and C. Their expected returns are given by 0.21...

 

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Suppose we have three stocks: A, B and C. Their expected returns are given by 0.21 r = 0.11 0.21 The covariance matrix is 1 0 0 V = 0 0.5 0 0 0 1 1) Find the Global Minimum Variance (GMV) Portfolio. (4pt) 2) Another portfolio on the MVF is the equal-weighted portfolio: XA = XB = Xc = 1/3. Using your answer in part (1) and the two fund separation theorem, find the portfolio on the MVF with an expected return of 15.5%. (4pt) 3) Suppose the risk-free rate is 1%. What is the Mean Variance Efficient (MVE) portfolio? (4pt) 4) Consider a mean-variance investor with a risk aversion coefficient of 3. Now he needs to allocate $ 20 millions to the risk-free asset and these three stocks. What amount would he put into each stock? (4pt) Suppose we have three stocks: A, B and C. Their expected returns are given by 0.21 r = 0.11 0.21 The covariance matrix is 1 0 0 V = 0 0.5 0 0 0 1 1) Find the Global Minimum Variance (GMV) Portfolio. (4pt) 2) Another portfolio on the MVF is the equal-weighted portfolio: XA = XB = Xc = 1/3. Using your answer in part (1) and the two fund separation theorem, find the portfolio on the MVF with an expected return of 15.5%. (4pt) 3) Suppose the risk-free rate is 1%. What is the Mean Variance Efficient (MVE) portfolio? (4pt) 4) Consider a mean-variance investor with a risk aversion coefficient of 3. Now he needs to allocate $ 20 millions to the risk-free asset and these three stocks. What amount would he put into each stock? (4pt)