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2) [40 points) Consider 3 risky securities with expected returns Hi = 0.14, M2 = 0.10, M3 = 0.08, standard deviations 01 = 0.26,02 =
2) [40 points) Consider 3 risky securities with expected returns Hi = 0.14, M2 = 0.10, M3 = 0.08, standard deviations 01 = 0.26,02 = 0.22, 03 = 0.15, and correlations between returns P12 = 0.3, P23 = 0.5, P13 = -0.3. a) [20 points) Find the minimum variance portfolio. That is, find the weights of the minimum variance portfolio. b)(10 points) Calculate the expected return of this portfolio. c)[10 points] Calculate the standard deviation of this portfolio. 2) [40 points) Consider 3 risky securities with expected returns Hi = 0.14, M2 = 0.10, M3 = 0.08, standard deviations 01 = 0.26,02 = 0.22, 03 = 0.15, and correlations between returns P12 = 0.3, P23 = 0.5, P13 = -0.3. a) [20 points) Find the minimum variance portfolio. That is, find the weights of the minimum variance portfolio. b)(10 points) Calculate the expected return of this portfolio. c)[10 points] Calculate the standard deviation of this portfolio
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