Suppose you are giving the outcome returns of some assets underdifferent scenarios. The probability for the bearish, neutral andbullish market is 20%, 50% and 30%.
| Asset | Bearish Market | Neutral | Bullish Market |
| A | -4.0% | 0.0% | 8.0% |
| B | 8.0% | 3.0% | -7.0% |
| C | -13.0% | -2.0% | 20.0% |
| D | 6.0% | 2.0% | -1.0% |
| E | 20.0% | 10.0% | 10.0% |
| Risk free Asset | 0.5% | 0.5% | 0.5% |
Please answer the following questions
Q1(1 point) What are the correlations between A and all otherassets?
Q2 (1 point) How do you form MVP from asset A and B only (findthe weights)?
Q3(1 point) What is the equation representing the efficientfrontier for the above case in Q2?
Q4(1 point) How do you form the MVP based on asset A and C only,assuming short selling is allowed?
Q5(1 point) What is the equation representing the EF for the Q4case?
Q6(1 point) What is the optimal RISKY market portfolio if assetA and D are the only two risky assets?
Q7(2 points) What is the optimal portfolio for an risk averseinvestor with A=200 is there are only asset A and D and risk freeasset?
Q8(2 points) Assume the market portfolio has std of 3%, and thebeta of asset A is 0.6, to what extend the expected return of assetA can be explained by singleindex model using the given marketportfolio as the market index, and how much is the unsystematicrisk based on this single-index model ?
