There are three distinct frontier portfolios, A, B and C. Portfolio Expected Returns Standard Deviation A 0.4 0.40 B 0.2 0.30 C 0.3 0.25 a) Compute, AB, the correlation between frontier portfolios A and B. (10 marks) b) Calculate the expected return on the global minimum variance portfolio. (15 marks) c) Calculate the maximum possible Sharpe Ratio from these frontier portfolios, when the risk free rate is 2% per annum. (15 marks) d) Explain, illustrating with graphs, the difference between the portfolio frontier when there is a risk free asset available for investment as compared to the portfolio frontier when there is not.

There are three distinct frontier portfolios, A, B and C. Portfolio Expected Returns Standard Deviation A B 0.4 0.2 0.3 0.40 0.30 0.25 a) Compute, RAB, the correlation between frontier portfolios A and B. b) Calculate the expected return on the global minimum variance portfolio. c) Calculate the maximum possible Sharpe Ratio from these frontier portfolios, when the risk free rate is 2% per annum. d) Explain, illustrating with graphs, the difference between the portfolio frontier when there is a risk free asset available for investment as compared to the portfolio frontier when there is not. There are three distinct frontier portfolios, A, B and C. Portfolio Expected Returns Standard Deviation A B 0.4 0.2 0.3 0.40 0.30 0.25 a) Compute, RAB, the correlation between frontier portfolios A and B. b) Calculate the expected return on the global minimum variance portfolio. c) Calculate the maximum possible Sharpe Ratio from these frontier portfolios, when the risk free rate is 2% per annum. d) Explain, illustrating with graphs, the difference between the portfolio frontier when there is a risk free asset available for investment as compared to the portfolio frontier when there is not