1) Suppose there is one risky asset and one risk free asset. Derive the optimal...
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Accounting
1) Suppose there is one risky asset and one risk free asset. Derive the optimal weights for a mean-variance optimizer to hold of each.
2) Suppose there are only two risky assets with variances 1^2 and 2^2 and correlation coefficient . Solve for the portfolio that has minimum variance.
3)
You are a mean-variance optimizer with A-2. Suppose we are in the single index model. There is one stock (stock A) with OA-12%, 4-0, and 2A-20%. You can also invest in the market index. ErM-7%. ,-15%. The risk free rate is 2%. Recall the equation from modern portfolio theory, Find optimal portfolio. (There are two risky assets, stock A and the market index, and a risk free rate ry). You are a mean-variance optimizer with A-2. Suppose we are in the single index model. There is one stock (stock A) with OA-12%, 4-0, and 2A-20%. You can also invest in the market index. ErM-7%. ,-15%. The risk free rate is 2%. Recall the equation from modern portfolio theory, Find optimal portfolio. (There are two risky assets, stock A and the market index, and a risk free rate ry)
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