You are given information on five portfolios on the minimum-variance frontier, one of which is...
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You are given information on five portfolios on the minimum-variance frontier, one of which is the market portfolio. Each portfolio is constiucted from five underlying risky asset classes. The risk-free rate is 2.5% and there are no short-sale constraints. Portfolio 1 2. 3 4 5 Expected Standard Portfolio Weights Return Deviation Asset A Asset B Asset C Asset D Asset E 8.70% 16.00% 30.00% 25.00% 20.00% 15.00% 10.00% 8.40% 14.50% 27.97% 23.78% 20.41% 15.81% 12.03% 7.60% 11.80% 22.57% 20.54% 21.49% 17.97% 17.43% 5.50% 7.90% 8.38% 12.03% 24.32% 23.65% 31.62% 5.00% 7.30% 5.00% 10.00% 25.00% 25.00% 35.00% (a) Identify the market portfolio. (6 marks) (b) If feasible, construct an efficient portfolio that has an expected return of 8% by: combining only two risky portfolios (8 marks) (ii) combining a risky portfolio with the risk-free asset (8 marks) (c) Which portfolio combination from pait (b) would you select? Explain
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