CASE STUDY CASE: Suppose that you are about to construct a portfolio of three risky assets, Stock A, Stock B, and Stock C. You have 100.000 TL of capital to invest. Relevant data regarding these stocks are presented as follows: Stock B C Investment amount 30.000 TL 40.000 TL 30.000 TL Expected return Variance 20" 3,24% 25% 1,44% 30% 0,25% Correlation Matrix A B 100% 65% 100% 55% 75% C A B C 100% INSTRUCTIONS Q1: Find the portfolio expected return. (10 points) Q2: Find the portfolio risk (standard deviation) by means of MATRIX ALGEBRA! (15 points) Q3: Calculate the relevant weights that enable you to construct the global minimum variance portfolio under the assumption of a. no short-selling is allowed (.e. weights must be positive). (15 points) b. short-selling is allowed (i.e. weights can be negative) (15 points) 04: Suppose that risk-free rate is 4%. Calculate the relevant weights that enable you to construct the tangency (market) portfolio under the assumption of c. no short-selling is allowed (i.e. weights must be positive). (15 points) d. short-selling is allowed (i.e, weights can be negative) (15 points) Q5: Fill in the following table. What do you see? Explain briefly. (15 points) STOCKS PORTFOLIOS Global Minimum Variance Portfolio Global Minimum Variance Portfolio Tangency Tangency Portfolio Portfolio Normal Portfolio No short sales Short sales allowed No short sales Short sales allowed ABC (01-02) Expected return ? 2 ? Standard deviation 2 ?? ? Coefficient of variation??? 2 ? Sharpe Ratio ? (Q3-a) ? ? ? ? (Q3-b) ? ? ? ? ? > (04-a) ? ? ? 2 (04-b) ? ? ? 2