You have $100,000 to invest. You are given three risky securities, A, B and C. The...

  

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You have $100,000 to invest. You are given three risky securities, A, B and C. The data for the expected returns, standard deviations, and pairwise coefficients of correlation of the three assets are given below: E(RA) 10% OA= 10% E(RB)=5% E(RC)=8% PLAB) = 0.5 PLAC) = 0.9 P(B.c) = -1.0 OB= 5% OC= 15% a. Suppose you only invest in security A and security B. What are the weights of A and B in the minimum variance portfolio? b. What are the expected rate of return and standard deviation of the minimum variance portfolio in (b)? c. If you are allowed to choose two assets from the above three assets, what is the standard deviation of the lowest risk portfolio and which two assets should be included in this portfolio? d (bonus part). What is the risk free rate of return in the market? You have $100,000 to invest. You are given three risky securities, A, B and C. The data for the expected returns, standard deviations, and pairwise coefficients of correlation of the three assets are given below: E(RA) 10% OA= 10% E(RB)=5% E(RC)=8% PLAB) = 0.5 PLAC) = 0.9 P(B.c) = -1.0 OB= 5% OC= 15% a. Suppose you only invest in security A and security B. What are the weights of A and B in the minimum variance portfolio? b. What are the expected rate of return and standard deviation of the minimum variance portfolio in (b)? c. If you are allowed to choose two assets from the above three assets, what is the standard deviation of the lowest risk portfolio and which two assets should be included in this portfolio? d (bonus part). What is the risk free rate of return in the market?

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