You are interested in investing in the following 4 sectors of the economy: (1) Agri-

cultural, (2) Manufacturing, (3) Energy, and (4) Financial. Your trusted investment rm oers 4

ETFs (Exchange Traded Funds) that closely mimic the performance of each sector. You are also

given the following estimates for the mean, standard deviation and correlation of annualized returns

of the ETFs.

(a) (3 points) What is the minimum variance portfolio? (Round to the nearest thousandth)

(b) (4 points) Find V as a function of V for any portfolio V on the Minimum Variance Line.

(Round to the nearest thousandth)

(d) (3 points) Assume that the risk-free return is 3%. Find the market portfolio M and M.

Find the Capital Market Line when investing risk-free is allowed in addition to investing in

the ETFs. (Round to the nearest hundredth)