7. Suppose that there are three stocks with rates of return ri, i = 1, 2, 3, respec- tively. The covariance matrix and the expected rates of return are [2.50% 1.00% 0.80%] 12% = 1.00% 2.70% 0.50% F= 9% 0.80% 0.50% 1.60% 7% Find the mean-variance efficient portfolio with expected return 9%. How is the variance of this portfolio compared to that of the second stock (that has the same expected return)? (Hint: Recall that to calculate x = -'r, one can either calculate - and do the matrix multiplication, or solve the linear system Ex = F.] 7. Suppose that there are three stocks with rates of return ri, i = 1, 2, 3, respec- tively. The covariance matrix and the expected rates of return are [2.50% 1.00% 0.80%] 12% = 1.00% 2.70% 0.50% F= 9% 0.80% 0.50% 1.60% 7% Find the mean-variance efficient portfolio with expected return 9%. How is the variance of this portfolio compared to that of the second stock (that has the same expected return)? (Hint: Recall that to calculate x = -'r, one can either calculate - and do the matrix multiplication, or solve the linear system Ex = F.]