7. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Weight Expected Return Variance (%) Bonds 50% 8% 10 Stocks 10% 12% 30 Commodities 15% 20% 15 Real Estate 25% 16% 20 Correlation Matrix Bonds Stocks Commodities Real Estate Bonds 1.0 -0.2 0.1 0.3 Stocks 1.0 0.4 0.6 Commodities 1.0 0.2 Real Estate 1.0 (a) Calculate the expected return and the standard deviation of the return of the portfolio. (b) Define marginal contribution to portfolio risk. What is the contribution to overall risk by bonds (as a % of total risk) in this portfolio? (c) Show that, for a portfolio with only two assets with equal marginal contribution to portfolio risk, the weight of each asset is proportional to the inverse of its volatility