Reference no: EM133119336

In a hypothetical world of 4 assets with the following information below. Assume no restrictions on short sales.

Variance-covariance matrix Asset 1 Asset 2 Asset 3 Asset 4 Expected returns

Asset 1 0.10 0.06

Asset 2 0.02 0.20 0.07

Asset 3 0.04 0.04 0.40 0.08

Asset 4 0.05 0.01 0.10 0.60

To Show workings and round your final answers to three decimal places in all three parts; to provide a screenshot of your key step in solving portfolio weights using Excel for part a.]

a) Find the portfolio weights for the minimum risk premium portfolio using the four assets.

b) Identify five new efficient portfolios and use a table to report their portfolio weights, portfolio returns, and standard deviations. Draw an efficient frontier diagram on the plane of return-standard deviation, using the six efficient portfolios identified.

c) Suppose a portfolio is composed of equal weights of each asset (i.e., [0.25, 0.25, 0.25, 0.25]). Is the portfolio efficient? Support your answer with the results of your calculations.]