70.2K

Verified Solution

Link Copied!

Consider three stocks: Colonel Motors (C), Separated Edison (S), and Unique Oil (U). Consider riskless lending/borrowing at 6%. Std. Dev. . 6% Asset Expected Return Colonel Motors (C) 12% Separated Edison (S) 8% 8 Unique Oil (U) 18% 3% 15% The variance-covariance matrix is: Colonel Motors (C) Separated Edison (5) Unique Oil (U) 30 8 Colonel Motors (C) Separated Edison (S) Unique Oil (U) 20 17 8 9 20 17 240 Find the composition of the optimal portfolio obtained by combining the three stocks, knowing that short selling is allowed. What are the proportion of your funds invested in stocks C, S, and U (in this order)? (Hint: Use Excel and the in-class examples) Continuation of Question 1. The expected return of the optimal portfolio is: O 12.7% 12.5% 13.04% 13.52% Consider three stocks: Colonel Motors (C), Separated Edison (S), and Unique Oil (U). Consider riskless lending/borrowing at 6%. Std. Dev. . 6% Asset Expected Return Colonel Motors (C) 12% Separated Edison (S) 8% 8 Unique Oil (U) 18% 3% 15% The variance-covariance matrix is: Colonel Motors (C) Separated Edison (5) Unique Oil (U) 30 8 Colonel Motors (C) Separated Edison (S) Unique Oil (U) 20 17 8 9 20 17 240 Find the composition of the optimal portfolio obtained by combining the three stocks, knowing that short selling is allowed. What are the proportion of your funds invested in stocks C, S, and U (in this order)? (Hint: Use Excel and the in-class examples) Continuation of Question 1. The expected return of the optimal portfolio is: O 12.7% 12.5% 13.04% 13.52%

Answer & Explanation Solved by verified expert

See Answer