1. (40 pts.) The table shows the rate of return (%) for two risky assets for the last 5 years.

Feb 3rd, 2012
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1. (40 pts.) The table shows the rate of return (%) for two risky assets for the last 5 years. . Year . Asset 1 2 3 4 5 1 11.34 -17.64 -5.38 44.72 13.39 2 23.57 51.96 -20.45 48.12 6.17 a) Find mean return, variance for each asset, and covariance and correlation among them. b) Find the weights of minimum variance portfolio. Find the mean and variance of the rate of return c) Suppose a portfolio mean return equal to 16% is desired. Find the variance of such portfolio. d) Is it possible to build a portfolio having standard deviation smaller than 20%? Show why yes or why not (you do not have to find such portfolio). 2. (60 p

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1. (40 pts.) The table shows the rate of return (%) for two risky assets for the last 5 years. . Year . Asset 1 2 3 4 5 1 11.34 -17.64 -5.38 44.72 13.392 23.57 51.96 -20.45 48.12 6.17a) Find mean return, variance for each asset, and covariance and correlation among them.b) Find the weights of minimum variance portfolio. Find the mean and variance of the rate of returnc) Suppose a portfolio mean return equal to 16% is desired. Find the variance of such portfolio.d) Is it possible to build a portfolio having standard deviation smaller than 20%? Show why yes or why not (you do not have to find such portfolio).2. (60 pts) An efficient portfolio is to be constructed from three securities with expected returns and covariance matrix given by 0.0625 0.0210 0.0075 0.20 ? = [ 0.0210 0.0784 0 ] ? = [ 0.13 ] 0.0075 0 0.040 0.17Suppose there is a risk free asset with rate rf = 0.10a) Find the weights for the unique

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