Please answer a Is there a portfolio P1, such that Lucy strictly prefers P1 to B? If so, characterize the portfolio. If not, why? and b. Lucy of course can use all three traded assets to construct her optimal portfolio. Write down the formal optimization program that can characterize the minimum variance portfolio set. [Hint: you don't need to set the Lagrangian function or solve the equation system from the rst-order conditions.]

1. Three independent risky assets are traded in the market. Their characteristics are described in the table below. Asset Expected rate of return (IE(T)) Standard Deviation (a) A 0.1 1 B 0.2 2 C 0.3 3 Lucy is a riskaverse investor. She is considering to construct a portfolio P1 =onAlwCoC. (a) Is there a portfolio P1, such that Lucy strictly prefers P1 to B? If so, characterize the portfolio. If not, Why? (b) Lucy of course can use all three traded assets to construct her optimal portfolio. Write down the formal optimization program that can characterize the minimum variance portfolio set. [Hintz you don't need to set the Lagrangian function or solve the equation system from the rstorder conditions]