A manager at a hedge fund company is analyzing three stocks X, Y, and Z with expected returns equal to 0.4, 0.7, and 0.7, respectively. The variance of X, of Y, and of Z is 2. The covariance between X and Y and between Y and Z is 1 and the covariance between X and Z is 0.

1. Find the composition of the minimum variance portfolio. (3 marks) 2. Find another efficient portfolio by setting lambda equals to one and mu equals zero. (3 marks) 3. If the risk-free rate is 0.2, find the tangency portfolio of risky assets. (3 marks)