Problem 2: Consider a market model with two securities Si and S2 and three scenarios, wl, w2 and wz such that P(wi) = P(W3) = P(W2)/2 = 0.25 6 for Wi Si(0) = 8; Si(1) = ( ) = 5 for W2, 12 for W3 11 for wi S2(0) = 10; S2(1) = 11 for W2 9 for W3 a) Calculate the quantities o?, oz and P12- b) Compute the weights in the portfolio with minimum risk for the data above. Does this portfolio involve short selling? c) Compute the expected return and the variance (risk) of the portfolio obtained in part b). d) Compute the weights in the portfolio with minimum risk for the data above, under the condition that short selling is forbidden. Determine the expected return and the variance of the portfolio. Problem 2: Consider a market model with two securities Si and S2 and three scenarios, wl, w2 and wz such that P(wi) = P(W3) = P(W2)/2 = 0.25 6 for Wi Si(0) = 8; Si(1) = ( ) = 5 for W2, 12 for W3 11 for wi S2(0) = 10; S2(1) = 11 for W2 9 for W3 a) Calculate the quantities o?, oz and P12- b) Compute the weights in the portfolio with minimum risk for the data above. Does this portfolio involve short selling? c) Compute the expected return and the variance (risk) of the portfolio obtained in part b). d) Compute the weights in the portfolio with minimum risk for the data above, under the condition that short selling is forbidden. Determine the expected return and the variance of the portfolio