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a. Calculate all expected returns and standard deviations of all portfolio combinations. Use 10% as the smallest unit of the combination, so for example the

a. Calculate all expected returns and standard deviations of all

portfolio combinations. Use 10% as the smallest unit of the combination, so for example the first combination will be stock 100%, bonds 0%, and commodities 0%, the second combination will be stock 90%, bonds 10%, commodities 0%, and so on (there are 66 possible combinations)

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QUESTION 6 A portfolio manager is trying to calculate the best combination of three assets stock, bonds and commodities. From the past performance, he has calculated the following Commod Three-Asset Case Stocks Bonds ities Expected return E(R) 9% 2% 4% Variance 190% 50% 90% Standard deviation 138% 71% 95% Correlation between stocks and bonds -0.3 Correlation between stocks and commodities 0.5 Correlation between bonds and commodities -0.1 a. Calculate all expected returns and standard deviations of all portfolio combinations. Use 10% as the smallest unit of the combination, so for example the first combination will be stock 100%, Bonds 0% and Commodities 0%, second combination stock 90% Bonds 10%, Commodities 0% and so on. (5 marks) b. Plot the efficient frontier for all combinations.

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