PRINCIPLES OF INVESTMENT ASSIGNMENT - BUSINESS FINANCE please help:

1. Describe what are the three types of efficiency and mention why they are important

to understand modern finance?

2. Explain the principle of non-arbitrage, how is this applied in portfolio optimization?

3. An agent says the best strategy to diversify a portfolio is to invest in assets with

positive correlation, given that in good times the investor will make big profits.

4. Compute the correlation between assets A and B if you know that the standard deviation of B is 50% of the standard deviation of A and the covariance between the two

assets is 0.5 times the variance of asset A.

5. What is the risk (measured as the variance) of the portfolio created by investing 50%

in asset A and 50% in asset B in the previous point? Assume that the variance of the

asset A is 4/9.

6. Compute the expected return and risk on your portfolio using the following information,

if you invest 20%, 40% and 40% in assets A, B and C: Expected returns on assets A, B

and C, respectively, 10%, 5% and 2%. Standard deviations of A, B and C, respectively,

10%, 6% and 1%. The Covariances between the assets are all zero but the covariance

between B and C which is 1.

7. If you have two assets with expected returns 10% and 5%, respectively, what is the

percentage you have to invest in every asset in order to get an expected return of 8%?

What would be the risk on that portfolio if the covariance between the two assets is

zero?

8. Explain all the recipe you have to use in order to be able to maximize expected return

given a predefined risk?

9. Explain all the recipe you have to use in order to be able to minimize expected return

given a predefined risk?