financial economics

Question 13. Consider the assets in the following table: Expected Return Variance Covariance with market Stock 1 04 .1 Stock 2 .06 .24 08 Stock 3 10 .64 .32 Market Index 08 16 .16 Risk-free rate .02 0 0 Consider a single index model. What are the o, 8, and o'(e) for each stock? Now, suppose stocks 1,2, and 3 are the only risky assets available to invest in (i.e., you can't directly invest in the market index.) You can also invest in the risk-free asset. Your coefficient of risk aversion is A = 2. Set up (i.e., plug numbers in but do not solve) the equation for the vector w* of optimal weights on each of the risky assets from MPT