Problem 1 Consider a portfolio of n assets equally weighted with expected rate of return M1, M2, ..., flin and same variance o2 and covariance Oij = ao, i + j, i, j = 1,2,...,n, where a is a small constant. (a) Find the expected rate of return of the portfolio. (b) Find the variance of rate of return of the portfolio denoted by om. (c) Plot oz. vs n in the case of o2 = 0.04, for a = 0, a = 1, a = -1, a = 0.2. (d) Assume n = 50,02 = 0.04. Plot 04 versus the correlation coefficient pij = a, i + j, i, j = 1, 2, ...,50, for a (-1,1]. Comment on your results. Problem 1 Consider a portfolio of n assets equally weighted with expected rate of return M1, M2, ..., flin and same variance o2 and covariance Oij = ao, i + j, i, j = 1,2,...,n, where a is a small constant. (a) Find the expected rate of return of the portfolio. (b) Find the variance of rate of return of the portfolio denoted by om. (c) Plot oz. vs n in the case of o2 = 0.04, for a = 0, a = 1, a = -1, a = 0.2. (d) Assume n = 50,02 = 0.04. Plot 04 versus the correlation coefficient pij = a, i + j, i, j = 1, 2, ...,50, for a (-1,1]. Comment on your results