1. Compute the tangency portfolio weights assuming a risk-free asset yields 5 percent.
2. How does your answer to exercise 5.2 change if the risk-free rate is 3 percent? 7 percent?
Exercise 5.2
Compute the tangency portfolio weights assuming a risk-free asset yields 5 percent.
3. Draw a mean-standard deviation diagram and plot AOL, Microsoft, and Intel on this diagram as well as the three tangency portfolios found in exercises 5.2 and 5.3.