lid kvar, 035 Arbetet ir sparats i WISE 3 of 4 4 Nsta Q2 2 Mean variance optimization and CAPM (9p) Consider 2 risky assets X and Y with the following data: E(1x) = 0.05 E(ry) = 0.120x = 0.16 oy = 0.2 Pxy = 2 and a risk-free asset exists with r;= 0.02. a. Compute the optimal portfolio weights wx and Wy and portfolio return E(rp) and portfolio standard deviation op b. Compute also the Sharpe-ratio of the portfolio and compare to the Sharpe-ratios of the individual assets. c. If E() = 0.06 instead, what are wx and wy? Compare and comment. d. If the investor's coefficient of relative risk aversion is A=4, what share of total wealth y should be invested in the risky portfolio P? Compute the complete portfolio return (rc) and portfolio standard deviation oc (use the original data as input). e. Illustrate portfolio optimization and your results in a figure and show and name all essential elements of portfolio optimization. f. If all investors are doing the same, and there are only 2 assets, what are the market portfolio weights for X and Y? If CAPM holds, would you do what you did in a) or what else would you do? B 1 : e en 0 / 10000 Ordarans Fr att ska O c a A ASUS ZenBook lid kvar, 035 Arbetet ir sparats i WISE 3 of 4 4 Nsta Q2 2 Mean variance optimization and CAPM (9p) Consider 2 risky assets X and Y with the following data: E(1x) = 0.05 E(ry) = 0.120x = 0.16 oy = 0.2 Pxy = 2 and a risk-free asset exists with r;= 0.02. a. Compute the optimal portfolio weights wx and Wy and portfolio return E(rp) and portfolio standard deviation op b. Compute also the Sharpe-ratio of the portfolio and compare to the Sharpe-ratios of the individual assets. c. If E() = 0.06 instead, what are wx and wy? Compare and comment. d. If the investor's coefficient of relative risk aversion is A=4, what share of total wealth y should be invested in the risky portfolio P? Compute the complete portfolio return (rc) and portfolio standard deviation oc (use the original data as input). e. Illustrate portfolio optimization and your results in a figure and show and name all essential elements of portfolio optimization. f. If all investors are doing the same, and there are only 2 assets, what are the market portfolio weights for X and Y? If CAPM holds, would you do what you did in a) or what else would you do? B 1 : e en 0 / 10000 Ordarans Fr att ska O c a A ASUS ZenBook