1.2 (10 points) Consider the formula for the variance of portfolio of two risky assets: o} = wg+w_o$ +2w,WPO OB Recall that w, denotes portfolio weight of asset A (proportion of funds invested in A) and w, denotes portfolio weight of asset B, with wx+wn =1. The coefficient P, -15psl measures the correlation between the returns on A and B. (a) (3 points) Would you rather invest in a portfolio of two assets which are perfectly correlated (i.e.p=1) or the stocks that are not correlated at all (p= 0), assuming that the expected returns are the same in both cases? Explain your answer using the formula for the portfolio variance. (b) (7 points) Find the portfolio weights of the two assets that minimise portfolio variance for any given value of p. 1.2 (10 points) Consider the formula for the variance of portfolio of two risky assets: o} = wg+w_o$ +2w,WPO OB Recall that w, denotes portfolio weight of asset A (proportion of funds invested in A) and w, denotes portfolio weight of asset B, with wx+wn =1. The coefficient P, -15psl measures the correlation between the returns on A and B. (a) (3 points) Would you rather invest in a portfolio of two assets which are perfectly correlated (i.e.p=1) or the stocks that are not correlated at all (p= 0), assuming that the expected returns are the same in both cases? Explain your answer using the formula for the portfolio variance. (b) (7 points) Find the portfolio weights of the two assets that minimise portfolio variance for any given value of p