Derive a formula for the weights of the minimum variance portfolio of two stocks using the following steps:

a. Compute the variance of a portfolio with weights x and 1 - x on stocks 1 and 2, respectively.

Show that you get

b. Take the derivative with respect to x of the expression in part

a. Show that the value of x that makes the derivative 0 is

c. Compute the covariance of the return of this minimum variance portfolio with stocks 1 and 2.AppendixLO1

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var - r (Rp) = x + (1 x) + 2x(1 - x)p