Table 27.3 presents the optimal risky portfolio with the analyst?s new forecast. Using information in Table 27.3, answer the following questions:

1. If the portfolio manager decides to restrict extreme portfolio positions and constrain the position in the active portfolio to be no more than 90%, solve for the new optimal risky portfolio (i.e., W_M, W_A, and W_i). Estimate the level of systematic risk, total risk and risk premium of this new portfolio. Also, calculate this portfolio?s performance measures (i.e., sharp ratio and M-square measure) and Benchmark risk.
2. Solve problem 1) for a portfolio manager whose desired benchmark risk is 1%.

Table 27.3 presents the optimal risky portfolio with the analyst½s new forecast. Using information in Table 27.3, answer the following questions: If the portfolio manager decides to restrict extreme portfolio positions and constrain the position in the active portfolio to be no more than 90%, solve for the new optimal risky portfolio (i.e., WM, WA, and Wi). Estimate the level of systematic risk, total risk and risk premium of this new portfolio. Also, calculate this portfolio½s performance measures (i.e., sharp ratio and M-square measure) and Benchmark risk. Solve problem 1) for a portfolio manager whose desired benchmark risk is 1%