John kamau wants to invest in securities of 3 companies that is ABC Limited, XYZ Limited andMNO limited. If the portfolio value is sh.100 million. All the three companies have the followinginformation

John kamau wants to invest in securities of 3 companies that is ABC Limited, XYZ Limited andMNO limited. If the portfolio value is sh.100 million. All the three companies have the followinginformationABC LTD XYZ LTD MNO LTD

ABC LTD

XYZ LTD

NMO LTD

Standard deviation

12%

16%

18%

weight of abc and xyz 

70% 

30% 

weight of abc and mno 

50%

0

 50%

Weight of Xyz andMno

0

60%

40%

market rate of return 

20%

14%

16%

risk free rate

12%

correlation coefficient:

between abc and xyz

-70%

between abc and mno

70%

between xyz and mno

30%

risk free rate

12%

99% confidence level

Required:(a) Calculate the portfolio risk of the 3 two asset portfolio combinations(b) Calculate the VaR of the two possible assets combinations(c ) calculate the minimum profit that the two assets combinations will yield

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