FINANCIAL MODELING

Suppose a minimum-variance portfolio should be constructed and short-selling is not allowed. Which two conditions should the weights wi,i=1,,n satisfy? Question 5 Consider n assets influenced by two factors, the oil price 1 and the rand-dollar exchange rate 2. Suppose the price of risk asso ciated with factor 1 is 0.10 and the price of risk asso ciated with factor 2 is 0.05. Assume that the risk-free rate is 6%. Formulate the arbitrage pricing model for the assets. If the exchange rate increases by one unit, what will the influence be on the expected rate of return of asset? Suppose a minimum-variance portfolio should be constructed and short-selling is not allowed. Which two conditions should the weights wi,i=1,,n satisfy? Question 5 Consider n assets influenced by two factors, the oil price 1 and the rand-dollar exchange rate 2. Suppose the price of risk asso ciated with factor 1 is 0.10 and the price of risk asso ciated with factor 2 is 0.05. Assume that the risk-free rate is 6%. Formulate the arbitrage pricing model for the assets. If the exchange rate increases by one unit, what will the influence be on the expected rate of return of asset