Assume 3 risky assets X, Y, Z where theexpected returnof X is 7%, theexpected returnof Y is 4% and historical/deterministic/ observedreturns of Z is 0.02%.

We also know that thevarianceof X is 20%, thevarianceof Y is 5% and thecorrelationof X and Y is -0.2 . The person who holds these assets puts them in a portfolio and decides that X is70% of the portfolio, Y is 25% of the portfolio and Z is 5% of the portfolio.

Question: If the person wants thestandard deviation of the portfolioto remain at 10% then how much weight should they allocate to each asset ?