Using the data describing a universe of risky assets (found in the attached spreadsheet), and where there is a risk-free rate of 4.5%, find the optimal (tangent) portfolio of risky assets in three cases. Assume the variance of the market portfolio is 10. a) Where no short sales are allowed. b) Where short sales in the sense of Lintner are allowed. c) For the portfolio in a), where the investor wishes only 80% of the systematic risk of the optimal, risky portfolio, how much of the investor's capital should be invested in the risk-free rate? 2 Security Number Mean Return Beta Idiosyncratic Risk 3 1 19.0 1.0 20.0 4 2 23.0 1.5 30.0 3 11.0 0.5 10.0 a 4 25.0 2.0 40.0 7 13.0 1.0 20.0 8 6 9.0 0.5 50.0 7 14.0 1.5 30.0 10 8 10.0 1.0 50.0 11 6 9.5 1.0 50.0 12 10 13.0 2.0 20.0 13 11 11.0 1.5 30.0 14 12 8.0 1.0 20.0 15 13 16 14 34 10.0 2.0 40.0 7.0 1.0 20.0 Using the data describing a universe of risky assets (found in the attached spreadsheet), and where there is a risk-free rate of 4.5%, find the optimal (tangent) portfolio of risky assets in three cases. Assume the variance of the market portfolio is 10. a) Where no short sales are allowed. b) Where short sales in the sense of Lintner are allowed. c) For the portfolio in a), where the investor wishes only 80% of the systematic risk of the optimal, risky portfolio, how much of the investor's capital should be invested in the risk-free rate? 2 Security Number Mean Return Beta Idiosyncratic Risk 3 1 19.0 1.0 20.0 4 2 23.0 1.5 30.0 3 11.0 0.5 10.0 a 4 25.0 2.0 40.0 7 13.0 1.0 20.0 8 6 9.0 0.5 50.0 7 14.0 1.5 30.0 10 8 10.0 1.0 50.0 11 6 9.5 1.0 50.0 12 10 13.0 2.0 20.0 13 11 11.0 1.5 30.0 14 12 8.0 1.0 20.0 15 13 16 14 34 10.0 2.0 40.0 7.0 1.0 20.0