Problem 10.8 Consider the following problem: Maximizef(w)=w(1)wPwsubjectto:w1V=1 where (0,1),=[1,2,,n] is the vector with the expected rates of return of n different assets in a portfolio with weight vector w= [w1,w2,,wn] and covariance matrix P=P>0. 10.5. Efficient Frontier 41 i) Find the value of w that maximizes f(w) and show any conditions that need to be satisfied ii) Use the result in part(i) to find the optimum portfolio of 4 stocks with the following characteristics: 1=0.08,2=0.10,3=0.25,4= 0.05,12=0.04,22=0.06,32=0.09,42=0.09,12=0.001,13= 0.008,14=0,23=0,24=0,34=0.002. If you have $1 million, how will you set up the portfolio? Problem 10.8 Consider the following problem: Maximizef(w)=w(1)wPwsubjectto:w1V=1 where (0,1),=[1,2,,n] is the vector with the expected rates of return of n different assets in a portfolio with weight vector w= [w1,w2,,wn] and covariance matrix P=P>0. 10.5. Efficient Frontier 41 i) Find the value of w that maximizes f(w) and show any conditions that need to be satisfied ii) Use the result in part(i) to find the optimum portfolio of 4 stocks with the following characteristics: 1=0.08,2=0.10,3=0.25,4= 0.05,12=0.04,22=0.06,32=0.09,42=0.09,12=0.001,13= 0.008,14=0,23=0,24=0,34=0.002. If you have $1 million, how will you set up the portfolio