For the questions, use the following averages and covariance matrix. PLEASE HELP

Question

For the questions, use the following averages and covariance matrix. PLEASE HELP ASAP!

Averages

covariance matrix

1.) For a portfolio formed by 30% in asset 2 and 70% in asset 3. Calculate the return on the portfolio.

2.) Calculate the variance of the portfolio formed by 30% in asset 2 and 70% in asset 3.

3.) Using the variance from question 3b, calculate the standard deviation of the portfolio formed by 30% in asset 2 and 70% in asset 3.

4.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 30% in asset 2 and 70% in asset 3.

5.) Calculate the average of a portfolio formed by 35% in asset 1 and 65% in asset 2.

6.) Calculate the variance of a portfolio formed by 35% in asset 1 and 65% in asset 2.

7.) Using the variance from question 3f, calculate the standard deviation for the portfolio formed by 35% in asset 1 and 65% in asset 2.

8.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 35% in asset 1 and 65% in asset 2.

9.) Which of the portfolios offer greater return per unit of risk taken?

a. The portfolio formed by 30% in asset 2 and 70% in asset 3
b. The portfolio formed by 35% in asset 1 and 65% in asset 2
c. Both give the same return per unit of risk

Explanation / Answer

1.) For a portfolio formed by 30% in asset 2 and 70% in asset 3. Calculate the return on the portfolio.

Return on the portfolio = Weight of Asset2* Return of Asset 2 + Weight of Asset3* Return of Asset 3

Return on the portfolio = 30%*12% + 70%*8%

Return on the portfolio = 9.20%

2.) Calculate the variance of the portfolio formed by 30% in asset 2 and 70% in asset 3.

Variance of the portfolio = Weight of Asset22*Variance of Asset 2 + Weight of Asset32*Variance of Asset 3 + 2* Weight of Asset2* Weight of Asset3*covariance of asset 2& 3

Variance of the portfolio = 30%^2*0.7 + 70%^2*0.9 + 2*30%*70%*0.3

Variance of the portfolio = 0.63

3.) Using the variance from question 3b, calculate the standard deviation of the portfolio formed by 30% in asset 2 and 70% in asset 3.

standard deviation of the portfolio = Variance of the portfolio ^(1/2)

standard deviation of the portfolio = 0.63^(1/2)

standard deviation of the portfolio = 79.37%
4.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 30% in asset 2 and 70% in asset 3.

Sharpe ratio for the portfolio = (Return on the portfolio-Risk Free Rate/standard deviation of the portfolio

Note : Risk Free Rate is not provided

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