Consider an economy with two risky assets

A

and

B

. The expected returns are

\\\\mu _(A)=

\ 0.20 and

\\\\mu _(B)=0.10

. The variance-covariance matrix is:\

\\\\Sigma =[[0.090,0.018],[0.018,0.010]]

\ (a) What is the composition of the minimum variance portfolio

h_(MVP)

, its expected\ return and the standard deviation of its rate of return?\ (b) Indicate

h_(MVP)

and the set of portfolios you can obtain with the two risky assets\ in

(\\\\sigma ,\\\\mu )

- space. On the same graph clearly indicate the region where you short\ sell asset

A

and the region where you short sell asset

B

.\ (c) Now, suppose that a risk-free asset

F

with return of

r_(F)=0.03

is introduced in\ this market, so the total set of assets available is now

(A,B,F)

. The expected\ return and the standard deviation of the tangency portfolio are

\\\\mu _(T)=0.112

and\

\\\\sigma _(T)=0.113

, respectively. What is the tangency portfolio

h_(T)

? Add

h_(T)

and the\ capital market line to your graph.

Consider an economy with two risky assets A and B. The expected returns are A= 0.20 and B=0.10. The variance-covariance matrix is: =[0.0900.0180.0180.010] (a) What is the composition of the minimum variance portfolio hMVP, its expected return and the standard deviation of its rate of return? (b) Indicate hMVP and the set of portfolios you can obtain with the two risky assets in (,) - space. On the same graph clearly indicate the region where you short sell asset A and the region where you short sell asset B. (c) Now, suppose that a risk-free asset F with return of rF=0.03 is introduced in this market, so the total set of assets available is now (A,B,F). The expected return and the standard deviation of the tangency portfolio are T=0.112 and T=0.113, respectively. What is the tangency portfolio hT ? Add hT and the capital market line to your graph. Consider an economy with two risky assets A and B. The expected returns are A= 0.20 and B=0.10. The variance-covariance matrix is: =[0.0900.0180.0180.010] (a) What is the composition of the minimum variance portfolio hMVP, its expected return and the standard deviation of its rate of return? (b) Indicate hMVP and the set of portfolios you can obtain with the two risky assets in (,) - space. On the same graph clearly indicate the region where you short sell asset A and the region where you short sell asset B. (c) Now, suppose that a risk-free asset F with return of rF=0.03 is introduced in this market, so the total set of assets available is now (A,B,F). The expected return and the standard deviation of the tangency portfolio are T=0.112 and T=0.113, respectively. What is the tangency portfolio hT ? Add hT and the capital market line to your graph