2. Perform the following tasks: a) Consider a portfolio of three funds, namely funds 1, 2 and 3, with weights W, W2 and W3, respectively. Construct the portfolio variance. [4 marks] b) Construct in the second fund's contribution, i.e. fund 2, to the variance of the portfolio [6 marks) c) Now assume that fund 1 is the investment in the Treasury bills. Construct the portfolio variance. [2.5 marks] 3. Suppose that ra = 0.05, E[r2] = 0.04, E[r3] = 0.03, E[ra] = 0.02, E[rs] = 0.01. Also, suppose that liquidity premium is constant at 1%. Compute 2- year, 3-year, 4-year and 5-year yields to maturity under at least two theories of the term structure that we have considered in the lectures. Also, draw the associated yield curves. [12.5 marks] 2. Perform the following tasks: a) Consider a portfolio of three funds, namely funds 1, 2 and 3, with weights W, W2 and W3, respectively. Construct the portfolio variance. [4 marks] b) Construct in the second fund's contribution, i.e. fund 2, to the variance of the portfolio [6 marks) c) Now assume that fund 1 is the investment in the Treasury bills. Construct the portfolio variance. [2.5 marks] 3. Suppose that ra = 0.05, E[r2] = 0.04, E[r3] = 0.03, E[ra] = 0.02, E[rs] = 0.01. Also, suppose that liquidity premium is constant at 1%. Compute 2- year, 3-year, 4-year and 5-year yields to maturity under at least two theories of the term structure that we have considered in the lectures. Also, draw the associated yield curves. [12.5 marks]