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Problem 29 Intro You found the following covariance matrix for 3 stocks: C D E F 1 Amazon Exxon Walmart 2 Amazon 0.059 0.025 0.019

Problem 29

Intro

You found the following covariance matrix for 3 stocks:

C D E F
1 Amazon Exxon Walmart
2 Amazon 0.059 0.025 0.019
3 Exxon 0.025 0.044 0.0092
4 Walmart 0.019 0.0092 0.064

Attempt 1/10 for 10 pts.

Part 1

Add the border-multiplied covariance matrix, i.e., the covariance matrix bordered by the portfolio weights, below the table. What is the variance of the equally-weighted portfolio?

Attempt 1/10 for 12 pts.

Part 2

You did extensive security research and came up with the following annual expected returns:

E(rA) = 0.07 E(rE) = 0.06 E(rW) = 0.05

What is the expected return of the equally-weighted portfolio? Use Excel's SUMPRODUCT() function.

Attempt 1/10 for 10 pts.

Part 3

What is the variance of the portfolio with the following weights?

wA = 0.4 wE = 0.25 wW = 0.35

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