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Unformatted text preview: Currently your entire portfolio is comprised of stock A but you are interested in adding one more stock to your portfolio. Would you choose stock B, C or D or would you need more information? Justify your answer. 4 3. [6 marks] An economy consists of N risky assets with mean vector μ and covariance matrix Σ . Provide three formulations of the optimization problems that enable you to determine the meanvariance eﬃcient frontier. (Note you do not need to derive the eﬃcient frontier) 5 4. [3 marks] It was established that under an economy with N risky assets, the optimal portfolio x * corresponds to the meanvariance eﬃcient frontier is given by x * = x MIN + τ z * for appropriate deﬁnitions of τ, x MIN , and z * . We also noted that the portfolio z * is a selfﬁnancing portfolio. List (without proof) three additional properties associated with the portfolio z * ....
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 Spring '09
 MARYHARDY
 Economics, Standard Deviation, Corr, meanvariance efficient frontier

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