Consider 3 assets, A, B, and C, with the expected returns and matrix of variance-covariance given below

	E(r)	variance-covariance
	A	B	C
A	15%	0.090	0.125	0.144
B	10%		0.040	-0.036
C	20%			0.625

1) What is the expected return and variance of a portfolio of (A, B) with weights (0.4, 0.6)? How about a portfolio of (A, B, C) with weights (0.2, 0.5, 0.3)? How about a portfolio of (A, B, C) weights (1/3, 1/3, 1/3)?

2) What is the min possible variance of a portfolio with only B and C? What are the optimal weights on B and C?

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To answer your questions lets calculate the expected return and variance for each portfolio 1 Portfolio of A B with weights 04 06 Expected Return Er Weight of A Expected Return of A Weight of B Expect... View the full answer