i just found this website and hope someone can help me. We have a midterm and we got 1 old exam but the Prof didnt want to provide the solutions and he is terrible anyway - so it kinda sucks, and i dont know if i am on the right path. we have to calculate everything with hand without excel) thanks a lot in advance.

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a) using gauss jordan: i have x= 40 y=30 z=20

b) A: 0.80 B: -0.20 C:.0.40 Expected Return: 17% SD: 14.1421%

c) (0.18 0.23 0.13)

d) w* TP: A: 0.70 B: 0.093 C: 0.213 SD(TP): 15.33% SR: 1.14611

e) so from here on i struggel alot

70% TP and 30% Riskfree Expected Return:0.14264 SD: 10.731%

f) i have A: 15.21 but Chat GPT says 7.5 and i dont know wich values do i use here? The ones from 100% TP or from the 70/30 portfolio?

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g) how do i calculate the SD of each Asset to plot it?

h) didnt even try yet


1 Answer 1


From what I understand of your questions, they are related to f) and g).

f) Can you list your workings for this question? ChatGPT is famously known to be unreliable. From what I understand, you subsitute everything in the first-order condition to obtain a value for $\sigma_{TP}$ correct?

g) He is not asking you to calculate the SD of individual assets to plot many efficient frontiers, he is asking you to calculate the SDs (and returns) of the portfolio based on different asset allocation combinations. For example, (A,B,C) = (30%,30%,40%) or (A,B,C) = (40%,30%,30%) until you can obtain a single frontier. The second part he asks you to plot the capital market line, it should look something like this (take note that the efficient frontier consists only of risky assets while the CML contains both risky and riskless assets):

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Actually, from what I understand, you do not even have to calculate anything, just make a drawing like above.

h) Please try it on your own first.


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