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So below is the solution to this question but i don't understand how did he worked out the weights could anyone explain? Suppose the annual

So below is the solution to this question but i don't understand how did he worked out the weights could anyone explain?

Suppose the annual rate of return on the risk-free asset is 2%. Construct the tangency portfolio consisting of the 5 selected stocks, M.

  1. Find the weights of the selected 5 stocks in M.

image text in transcribedimage text in transcribedimage text in transcribed

1 21+ 22 + 23 W1 + W2 + W3 = 1 (W = 0 at M) W, = 12-1 (E(r) rf1) w = = 2-1 (E(r) -181) 011 012 013 22 021 022 023 E (ru)-1 E (72) -rf E (13) - rf 23 031 032 033 z = invsig x Er-rf* oneV -0.349553242 11.52210306 -0.087390789 -3.959999319 -0.105035975 Er-Rf* oneV 0.02525104 0.084327382 0.08 2617851) 0.056374686 0.055951999 Weights of Stocks: Wr TLS BHP WI CBA W2 QAN Ws WOW W5 W4 Tangency Portflio -4.98% 164.13% -1.24% -56.41% -1.50% 1 21+ 22 + 23 W1 + W2 + W3 = 1 (W = 0 at M) W, = 12-1 (E(r) rf1) w = = 2-1 (E(r) -181) 011 012 013 22 021 022 023 E (ru)-1 E (72) -rf E (13) - rf 23 031 032 033 z = invsig x Er-rf* oneV -0.349553242 11.52210306 -0.087390789 -3.959999319 -0.105035975 Er-Rf* oneV 0.02525104 0.084327382 0.08 2617851) 0.056374686 0.055951999 Weights of Stocks: Wr TLS BHP WI CBA W2 QAN Ws WOW W5 W4 Tangency Portflio -4.98% 164.13% -1.24% -56.41% -1.50%

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