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# solution

Question 3) You own a portfolio constituted of 30% in asset A and 70% in asset B. The returns and volatilities of the assets are given in the following table: Asset A Asset B Return 16% 20% Volatility 8% 12% Use Excel to construct all possible portfolios with weights Wi and w2 of the above two assets. Let the weight wi vary between 0 and 1 with an increment of 0.1. Find the expected return and volatility of each portfolio when p= 1, p=0, p=-0.2 and p=-1 Please do not submit excel output for this part but use the results to answer the following questions: a) Plot the returns vs the volatilities of all possible portfolios of the above three scenarios. Let the expected returns be the y axis and the volatilities be the x axis. b) Find the minimum variance portfolio MVP when p=-0.2 and compare the volatility of this portfolio to that of the MVP obtained when p = 0 and p = 1 p=-0.2 p=0 p=1 OMVP c) Find the mean variance efficient portfolio MVEP (the maximized sharpe ratio portfolio) when p=-0.2 and rf 6% and find the return of this portfolio

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