申論題

2. (15 points) To construct a portfolio using the mean-variance framework, one needs cstimates of the expected return r, the variance  σ²i and the co-variance aj for each stocks, j. Forn stocks, you have to estimate a total of n(n-1)/2 correlation coefficients. Single index models are used, to reduce this hugc amount of needed estimates. Now we are going to construct a portfolio with two assets using the single index model.

(4) (6 points) Now assuming a portfolio with weights for asset A and asset B are 0.7 and 0.3. Plcase find out E(rp) and .