1. An Australian investment adviser has conducted a meeting with wealthy individual investors and noted that they have high risk preferences and are making the highest reux for ewry dollar invested. Table A shows the expected returns for each asset class: Table A Bonds Equities Property Asset Returns 0-031 0.076 0.012 Table B shows the asset allocation among three available funds for each asset class: Table B Bonds Equities Property Fund X 0.3 0.6 0.1 Fund Y 0.6 0.2 0.2 Ehnd 2 0.3 0.3 0.4 The variance-covariance of the three assets is given in Table C: Table C Bonds Equities Property 0.0024 -0.C|110 0.0115 -0.0010 0.0297 0.0156 0.01115 0.11156 0.0259 Hint: when solving questions below make sure the matrices, vectors you mutract are oonfonnant, e.g., bonds returns cornspond to bonds proportions, etc. Raundyouranswers to 4decimal digits. a] Wbatistheexpeetedreturnoffund'r? b) Which of the funds, X, Y or Z, is the most appropriate for these wealthy investors based on their preferences? c] What is the risk (measured by standard deviation) off-ind Z? Hint: Portfolio Variance = 2:1 21:1 wiwjdij=w'2w, where w and 2 are the column vector of asset weights and asset variance-covariance matrix, respectively. d] Suppose that only funds X, Y and Z are available for investors in the market. An investor desires the following portfolio allocations: Prowrtious 0.5 0.3 0.2 Constructthedesiredportfoliofromthemdsavailableinthemarket