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The proposed portfolio being considered are as follows: Property Asset Class Characteristics Investment Expected Returns Expected Risk o A B C 6% 10% 15% 30%
The proposed portfolio being considered are as follows: Property Asset Class Characteristics Investment Expected Returns Expected Risk o A B C 6% 10% 15% 30% 10% 15% Proposed Portfolio Weights 5% 60% 35% Correlation Matrix A B A 1 0 -0.2 B 0 1 -0.2 0 1 C 0 For simplicity, assuming that short-selling is allowed in the following analysis and the Markowitz Portfolio Choice Model is used for analysis. (a) Suppose that the client wants to minimize the expected risk across these three property classes. How low can this expected risk be? What will be the corresponding expected return and portfolio weights?..(6 marks) (Hint: suffice to show only key formulas and steps)
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