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The rates of return of two financial securities have the following vector of expected returns and matrix V of variances - covariances: = 1 1
The rates of return of two financial securities have the following vector of expected returns and matrix V of variancescovariances:
V
Compute the ecient frontier of the Markowitzs model.
Suppose that short sales are not allowed. Say if the ecient frontier exibits risk reduction and why this happens or does not happen.
Assume there is a riskfree asset in the market with riskfree rate Determine the new frontier of ecient portfolios adding the possibility to invest in the riskfree asset.
Compute the mean, the variance and the composition of the tangency porfolio between the two frontiers.
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