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Please provide clear answers! Here are the correct answers: 1. A curve bending to the left with the MVP being on the point most to the left of that curve. 2. To draw the SML, Beta B = 0.7 and Beta C = 1.1. *draw the SML*.

Throughout this exercise you can assume that the CAPM conditions hold (ie, every asset is in equilibrium). (1,2 points) Imagine that for some reason you can only invest in Assets B and C, and assume that the correlation of their returns is 0 . Draw the set of possible portfolios that you could build by combining these 2 assets in the risk-return diagram. Beyond the set of possible portfolios itself, also outline the following 3 points in your sketch (do not forget to clearly identify the variables in your x and y-axis): - Asset B (and its values in the y-axis and x-axis) - Asset C (and its values in the y-axis and x-axis) - The corresponding Minimum Variance Portfolio (no need to disclose the values in y and x-axis) (1,2 points) Draw the Security Market Line of this Economy clearly identifying your x and y-axis, and outlining the following Assets on it (and their corresponding x and y-axis values). - Asset B - Asset C - Market Portfolio - Risk-free Asset