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Portfolio weights for the minimum risk premium portfolio

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Reference no: EM133115108

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

0.09
  1. Find the portfolio weights for the minimum risk premium portfolio using the four assets. 
  2. 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. 
  3. 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. 

Reference no: EM133115108

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