(15pt) Consider a portfolio consisting of two risky assets indexed by 1 and 2 . Thus, the portfolio return is rp=r1+(1)r2. Assume that the expected returns are given by r1=0.05 and r2=0.03, and the variances and covariance for the returns are given by 12=0.03,22=0.04, and 12=0.01. We assume that short selling is allowed. (a) Derive the optimal weight given the target return r0=0.04. (b) Derive the optimal weight given the target variance 02=0.03. (Hint: express rp and p2 using and maximize/minimize them with respect to .) (15pt) Consider a portfolio consisting of two risky assets indexed by 1 and 2 . Thus, the portfolio return is rp=r1+(1)r2. Assume that the expected returns are given by r1=0.05 and r2=0.03, and the variances and covariance for the returns are given by 12=0.03,22=0.04, and 12=0.01. We assume that short selling is allowed. (a) Derive the optimal weight given the target return r0=0.04. (b) Derive the optimal weight given the target variance 02=0.03. (Hint: express rp and p2 using and maximize/minimize them with respect to .)