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3. Assume that there are three assets having mean rates of retum fi = 8%, Fz = 10%, 8z = 6%, standard deviations on =
3. Assume that there are three assets having mean rates of retum fi = 8%, Fz = 10%, 8z = 6%, standard deviations on = 1.5, 02 = 0.5, 03 = 1.2 and correlations P12 = 0.3, P23 = 0, P13 = -0.2. (a) Find the covariance matrix for these three assets. (b) Find the mean rate of return and the standard deviation of portfolio P, consisting of the above three assets with respective weights w, = 40%, W2 = -20%, W3 = 80%. (C) Find the mean rate of return and the standard deviation of portfolio P, consisting of the above three assets with respective weights w, = 30%, Wz = -10%, W3 = 80%. (d) Find the mean rate of return and the standard deviation of portfolio Pz consisting of the above three assets with respective weights wn = 20%, W2 = 10%, W3 = 70%. (e) Plot the points representing portfolios P1, P2, P3 on the i-o diagram. (1) Identify the least risky portfolio and the portfolio with maximum risk. 3. Assume that there are three assets having mean rates of retum fi = 8%, Fz = 10%, 8z = 6%, standard deviations on = 1.5, 02 = 0.5, 03 = 1.2 and correlations P12 = 0.3, P23 = 0, P13 = -0.2. (a) Find the covariance matrix for these three assets. (b) Find the mean rate of return and the standard deviation of portfolio P, consisting of the above three assets with respective weights w, = 40%, W2 = -20%, W3 = 80%. (C) Find the mean rate of return and the standard deviation of portfolio P, consisting of the above three assets with respective weights w, = 30%, Wz = -10%, W3 = 80%. (d) Find the mean rate of return and the standard deviation of portfolio Pz consisting of the above three assets with respective weights wn = 20%, W2 = 10%, W3 = 70%. (e) Plot the points representing portfolios P1, P2, P3 on the i-o diagram. (1) Identify the least risky portfolio and the portfolio with maximum risk
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