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Please explain clearly. Thank you so much!! QUESTION 6 There is an economy that has only three assets: equity (E), bond (B) and real-estate (R).
Please explain clearly. Thank you so much!!
QUESTION 6 There is an economy that has only three assets: equity (E), bond (B) and real-estate (R). The total market capital (total value) of each asset is $100 trillion, $500 trillion and $400 trillion respectively for E, B and R. The expected returns of E, B and Rare 15%, 2% and 10% respectively and their standard deviations are 5%, 0.5% and 1% respectively. The correlation coefficient between E and B is 0.2, B and R is 0.1 and E and R is 0.25. Choose the correct statement(s). i. It is impossible to build a portfolio that does not have any idiosyncratic risk. ii. If you have $5 million, you cannot hold a market portfolio in this economy. iii. When selling something you do not have is impossible in this economy, an investor may be able to create a portfolio that does not have any systematic risk. O i Oiii O None of the aboveStep by Step Solution
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