12. The following questions are related to modern portfolio theory. [Total: 25] Assume there are only two stocks in the equity market. The risk-free rate is 1.00%. Stock Return Volatility Correlation Matrix X Y X 15.00% 20.00% 1.0 0.7 Y 10.00% 15.00% 0.7 1.0 D (a) Make an investment portfolio using the risky assets that has an expected return 12%. [5] (b) Calculate the volatility of the portfolio in (a). [5] (c) Calculate the composition of the market portfolio. [10] (d) Construct, using the risk-free asset, the minimum variance portfolio that has an expected return 12%. [5] 12. The following questions are related to modern portfolio theory. [Total: 25] Assume there are only two stocks in the equity market. The risk-free rate is 1.00%. Stock Return Volatility Correlation Matrix X Y X 15.00% 20.00% 1.0 0.7 Y 10.00% 15.00% 0.7 1.0 D (a) Make an investment portfolio using the risky assets that has an expected return 12%. [5] (b) Calculate the volatility of the portfolio in (a). [5] (c) Calculate the composition of the market portfolio. [10] (d) Construct, using the risk-free asset, the minimum variance portfolio that has an expected return 12%. [5]