the Question is Exercise 4 and all the information given in exercise 2 is posted as well.

Exercise 2.

You are given a four security portfolio:

Security 1 2 3 4

Expected Return 0.06 0.10 0.12 0.17

SD 0.09 0.14 0.18 0.22

Correlations:

1 2 3 4

1 1 0.30 0.35 0.40

2 1 0.10 0.40

3 1 0.35

4 1

Exercise 4. Use the same information from exercise 2. Solve for the portfolio weights which maximize the ratio of the expected excess return to the standard deviation of the portfolio return. Max LEs rj] os You need to add a risk-free rate of 4%. What is the minimum standard deviation and what is the expected return? Using this information find the risk minimizing portfolio with a target return of 14.2% and then find the expected return - maximizing portfolio with a risk tolerance of 13%. Let Es be the expected return on the four securities and E, be your portfolio target return. The weight for the targer return of 14.2% is given by: - Ep - rf Ws - E-rf The weight for the standard deviation is: 6216 Exercise 4. Use the same information from exercise 2. Solve for the portfolio weights which maximize the ratio of the expected excess return to the standard deviation of the portfolio return. Max LEs rj] os You need to add a risk-free rate of 4%. What is the minimum standard deviation and what is the expected return? Using this information find the risk minimizing portfolio with a target return of 14.2% and then find the expected return - maximizing portfolio with a risk tolerance of 13%. Let Es be the expected return on the four securities and E, be your portfolio target return. The weight for the targer return of 14.2% is given by: - Ep - rf Ws - E-rf The weight for the standard deviation is: 6216