Z3269110

Z3269110 - Question 1 (i) The objective function is to...

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(i) The objective function is to minimize the risk of portfolio at a given expected return of 20% p.a. The risk of portfolio is minimized by changing the composition of the portfolio, subject to the constraints that the weights must add up to one, the individual weights must be greater than or equal to zero and the expected rate of return of portfolio must be twenty percent. (ii) The composition of the minimum variance portfolio: Asset weight BHP CBA RIO WBC QBE w i 0.0060 0.1133 0.0000 0.0313 0.0000 TLS WES ANZ NAB QAN 0.0988 0.1419 0.0578 0.0000 0.0000 WDC LGL WOW WPL MQG 0.0000 0.0215 0.3052 0.0270 0.0077 AOE CSL STO BXB FMG 0.0031 0.1505 0.0000 0.0359 0.0000 (iii) Portfolio risk return combination E(R P ) σ P 20.0000 % 14.65 38% (iv) If short selling is allowed, the constraint that the weight of individual assets must be greater than or equal to zero should be removed as the individual weights can be negative. Question 2
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Z3269110 - Question 1 (i) The objective function is to...

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