Question 1

Note the (incomplete) variance-covariance matrix S shown in the spreadsheet. If the correlation between S1 and S2 is 0.45, that between S2 and S3 is 0.02, and that between S1 and S3 is 0.5, fill in the remaining elements of the variance-covariance matrix. Enter your answer with five decimal places.

3rd row, 2nd column (Covariance between S2 and S3): ?

3rd row, 3rd column (Variance of S3): ?

Now that you have filled the S matrix, follow the matrix solution procedure discussed in Module 6 to obtain the optimal portfolio P*. Enter the weights obtained for each of the securities, with three decimal places.

Weight for S1: ?

Weight for S2: ?

Weight for S2: ?