Questions

Assume that there are three assets available. A is a risk-free asset with that yields a rate of 8%. The other two assets, B and S are risky asset with the following attributes.

Asset Expected Return Standard deviation

A

B 12% 15%

S 20% 30%

Correlation between assets B and S is 0.1.

Question 1:

To determine the investment proportions in the minimum-variance portfolio of the two risky assets, the expected value and standard deviationof its rate of return. I did the following : {see attachment}

Question 2:

To draw the investment opportunity set of the two risky funds. I used investment proportions for the stock funds of zero to 100% in increments of 20%.

Tabulate the investment opportunity set of the two risky funds {see attachment}

Draw the investment opportunity set of the two risky funds {see attachment}

Question 3:

If using only risky assets S, and B, to set up portfolio to yield an expected return of 14%, I did the following {see attachment}

Question 4:

Using all three assets A, B, and S, how can I set up portfolio to yield an expected return of 14%? What would be the standard deviation this portfolio? What proportion of each asset invested?

Question 5:

Assuming the borrowing is not allow, to construct a portfolio of only risky assets S, and B, with an expected return of 24%. What would be appropriated portfolio proportions? Consequently, what are their standard deviations? If the borrowing is allowed at the risk free rate, how much less the standard deviation would be?

Assets are explained. Minimum variance portfolio and yield expected return is discussed.