Question 1: Consider three stocks: Colonel Motors (C), Separated Edison (S), and Unique Oil (U). Expected Return Variance (02) Colonel Motors (C) 14% 6% Separated Edison (S) 8% 3% . | Unique Oil (U) 20% 15% variance-Corarina Matrix The covariance matrix (Cij) is: CS U isc Fes? Eso Ap C 0.20 0.40 Live Gus Gu2] 0.30 U S.t. Xot Xg+x=1 Find the composition of the optimal portfolio (Xc, Xs, and Xu), knowing that short selling is allowed. In addition, borrowing and lending at the risk free rate (Rp = 5%) is also possible. You can use Excel. [' s you 7 S Question 2: Continuation of Problem 1. What is the expected return of the optimal portfolio? 2o - X, Reax Rs.tx Question 3: Continuation of Problem 1. What is the standard deviation of return for the optimal portfolio? To = x 2 + (x Fs) + (x 0 ) 2 + 2x(xstes + 2 x Xu feut 2:xs xusu Question 4: Consider the information in Problem 1, but assume borrowing and lending at the risk free rate of 7%. What is the composition of your optimal portfolio now (Xc,Xs, and Xu, respectively)? Question 5: Continuation of Problem 4. What is the standard deviation of return for the optimal portfolio? 6. Pas Calis pas 1.412 XB: 1-XA Question 6: Consider stocks A and B. Xa Cici Batalha 0 *=28357.47 Stock Expected Return Std. Dev. A 12% 2.83% B 6 % 1.41% ABO. CAR 0 What is the composition (XA and XR)of the minimum variance portfolio obtained by combining stocks A and B, knowing that returns of stocks A and B are independent? Question 7: Continuation of Problem 6. What is the expected return of the minimum variance portfolio? Question 8: Continuation of Problem 6. What is the standard deviation of return for the minimum variance portfolio? Question 1: Consider three stocks: Colonel Motors (C), Separated Edison (S), and Unique Oil (U). Expected Return Variance (02) Colonel Motors (C) 14% 6% Separated Edison (S) 8% 3% . | Unique Oil (U) 20% 15% variance-Corarina Matrix The covariance matrix (Cij) is: CS U isc Fes? Eso Ap C 0.20 0.40 Live Gus Gu2] 0.30 U S.t. Xot Xg+x=1 Find the composition of the optimal portfolio (Xc, Xs, and Xu), knowing that short selling is allowed. In addition, borrowing and lending at the risk free rate (Rp = 5%) is also possible. You can use Excel. [' s you 7 S Question 2: Continuation of Problem 1. What is the expected return of the optimal portfolio? 2o - X, Reax Rs.tx Question 3: Continuation of Problem 1. What is the standard deviation of return for the optimal portfolio? To = x 2 + (x Fs) + (x 0 ) 2 + 2x(xstes + 2 x Xu feut 2:xs xusu Question 4: Consider the information in Problem 1, but assume borrowing and lending at the risk free rate of 7%. What is the composition of your optimal portfolio now (Xc,Xs, and Xu, respectively)? Question 5: Continuation of Problem 4. What is the standard deviation of return for the optimal portfolio? 6. Pas Calis pas 1.412 XB: 1-XA Question 6: Consider stocks A and B. Xa Cici Batalha 0 *=28357.47 Stock Expected Return Std. Dev. A 12% 2.83% B 6 % 1.41% ABO. CAR 0 What is the composition (XA and XR)of the minimum variance portfolio obtained by combining stocks A and B, knowing that returns of stocks A and B are independent? Question 7: Continuation of Problem 6. What is the expected return of the minimum variance portfolio? Question 8: Continuation of Problem 6. What is the standard deviation of return for the minimum variance portfolio
