Risk Management; Corporate Finance

Here are expected returns and a variance-covariance matrix of returns for four assets.

	E[r]				Zebra	Yell	Xyl	Wet
Zebra	12%			Zebra	0.0052	0.0049	0.0130	-0.0075
Yell	8%			Yell	0.0049	0.0122	0.0144	-0.0220
Xyl	16%			Xyl	0.0130	0.0144	0.0585	-0.0246
Wet	22%			Wet	-0.0075	-0.0220	-0.0246	0.1088

Part (A ). Calculate the expected return, E[r], of 5 specific points on the efficient frontier of risky assets corresponding to standard deviations of portfolio returns of sigma () of: 10%, 15%, 20%, 25% and 30%.

acceptable
	E[r]
10%
15%
20%
25%
30%

Part B: Plot the five above data points of the efficient frontier, where the X-axis (independent axis) is sigma (), and the Y-axis (dependent axis) is expected return, .

Part C:

Calculate the value at risk for each of the above 5 efficient portfolios given the following parameters.

3	time-frame, in months
98%	confidence level
75	initial value of portfolio, $millions
	VaR
10%
15%
20%
25%
30%