You are an investment analyst with the Silver V-man Investment Bank's Real Estate Funds Management Department. An important client has asked for the bank's advice on constructing an investment portfolio from three different direct real estate investment asset classes. The client has a total fund of $1 billion and is considering to invest in property. The potential portfolio asset classes that are presently considered are as follows:

Property Asset Class Characteristics

Investment	Expected Returns	Expected Risk (i)
Retail	10%	30%
Offices	15%	10%
Industrial	20%	15%

Correlation Matrix

	Retail	Office	Industrial
Retail	1	0	-0.5
Office	0	1	0
Industrial	-0.5	0	1

A junior analyst under your supervision proposes the following portfolio weights on the investment of the above three property asset classes:

Property Asset Class	Proposed Portfolio Weights
Retail	10%
Offices	50%
Industrial	40%

(Express your answers in 4 decimal points if necessary)

(a) Compute the proposed portfolio's expected return and expected risk. (8 marks)

Assuming short-selling is allowed in the following analysis (to simplify the math) and we use Markowitz Portfolio Choice Model for analysis.

(b) Suppose that the client wants to minimize the expected risk across these three property classes. How low should this expected risk be and what will be the corresponding expected return and portfolio weights? (10 marks)

(c) Characterize the efficient frontier for risky assets and a risk-free asset. Suppose the client can borrow or lend at the risk-free rate of 3%. What should be the tangency portfolio? (10 marks)

(d) Does the proposed portfolio by the junior analyst lie on the efficient frontier for these three property assets and a risk-free asset? Explain your answers. (5 marks)