Task 3- Optimal Portfolio 1- Calculate the optimal weights for the two asset portfolio such that risk is minimized. 2. Using the optimal weights for the two-asset portfolio in question 4, calculate...

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Task 3- Optimal Portfolio



1- Calculate the optimal weights for the two asset portfolio such that risk is minimized.


2. Using the optimal weights for the two-asset portfolio in question 4, calculate the portfolio risk and return. Mark the minimum variance portfolio on the investment opportunity set.


3- Compare the risks of individual assets you selected for the two asset portfolio with the risk of the minimum variance portfolio. Comment on the differences, if any.

Answered Same DaySep 08, 2021RMIT University

Answer To: Task 3- Optimal Portfolio 1- Calculate the optimal weights for the two asset portfolio such that...

Sumit answered on Sep 09 2021
142 Votes
1. The two asset that has been chosen for the portfolio are BHP and IAG. The weight for the portfolio has been calculated using the formula given below:
WA = (Variance of B- Covariance between AB) / (Variance of A + Variance of B – 2*Covariance between AB)
On solving the optimum weight are calculated as:
BHP: 0.34
IAG: 0.66
2. The formula used for calculating the risk of...
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