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Question 3 (15 Marks] The following facts are known with respect to three assets (labelled A, B and C) . . . Assets A and Care uncorrelated. The expected return on B is 10%. The return standard deviation of C is 0.09. The return correlation between A and B is the same as that between B and C. The risk free rate is 4% and the market risk premium is 6% The return standard deviation of B is 5%. The expected return on C is 3% and on A is 5%. The correlation between C and B is 0.5. The return variance of A is 0.0049. All returns, standard deviations, variances and correlations are on an annual basis. a) Calculate the return Variance-Covariance (VCV) matrix of A, B and C. Hint: Recall that the covariance of X and Y is calculated as Oxy = Pxy OxOy. [3 Marks] Corr. A B 1 0.5 0 0.5 1 B 0.5 1 0 0.5 sd A B 0.07 0.05 0.09 VCV A B A B 0.00490 0.00175 0.00000 0.00175 0.00250 0.00225 0.00000 0.00225 0.00810 Screenshot