This is the only information given for this question Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks The portfolio weights, volatility and correlation with the market portfolio of the three stocks are given in the table below Portfolio weight Volatility Correlation with the market portfolio Yahoo 0 25 12 0 4 Microsoft 0 35 25 0 6 Google 0 4 13 0 5 1 If you expect to receive a rate of return 9 on this portfolio , would you invest in this portfolio Explain and show all work 2 Assume the CAPM correctly prices risk, is the market portfolio efficient Explain why

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Question: *This is the only information given for this question: Suppose you are a head of a hedge fund and are thinking to create a portfolio

*This is the only information given for this question:

Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks. The portfolio weights, volatility and correlation with the market portfolio of the three stocks are given in the table below:

	Portfolio weight	Volatility	Correlation with the market portfolio
Yahoo	0.25	12%	0.4
Microsoft	0.35	25%	0.6
Google	0.4	13%	0.5

1. If you expect to receive a rate of return 9% on this portfolio , would you invest in this portfolio? Explain and show all work?

2. Assume the CAPM correctly prices risk, is the market portfolio efficient? Explain why.

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