Assume that the mean-variance opportunity set is constructed from only two risky assets, A and B. Their variance-covariance matrix is

Asset A has an expected return of 30%, and Asset B has an expected return of 20%. Answer the following questions:
(a) Suppose investor / chooses his "market portfolio" to consist of 75% in asset A and 25% in asset B, whereas investor J chooses a different "market portfolio" with 50% in asset A and 50% in asset B.
Weights chosen by I are [.75 .25].
Weights chosen by J are [.50 .50].
Given these facts, what beta will each investor calculate for asset A?
(b) Given your answer to part (a), which of the following is true and why?
1. Investor / will require a higher rate of return on asset A than will investor J.
2. They will both require the same return on asset A.
3. Investor J will require a higher rate of return on asset A than will investor I.
(c) Compute the zero-beta portfolios and the equations for the security market line for each investor.

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