Assume that a risk-free money market account is added to the market described in Q2....
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Accounting
Assume that a riskfree money market account is added to the market described in Q The continuously compounded rate of return on the money market account is per period.
i Use the method of Lagrange multipliers to determine the proportions of wealth invested in the three assets available for the minimum variance portfolio with expected return Your answer must express the proportions as a function of
ii Recall that the market portfolio has highest Sharpe ratio. Formulate the optimisation problem which characterises the market portfolio. You don't have to solve this optimisation problem.
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