2. Consider 2 stocks with the following characteristics: stock Expected return Standard deviation 1 1 2 .15 10 with the correlation of return p=-1. (a) How much should be invested in each asset to obtain a risk-free portfolio? What is its expected return? (b) Assuming perfect capital markets, what is the valeu of the risk free rate, r/? 3. Suppose that there 4 assets: 1, 2, 3 and 4. Eri) = E(ru) = E(T) = E(ra) = .08 and 01 = 02 = 03 = 04 = 20. Also, P12 = .85, P13 = .60 and P14 = .45. Suppose that your portfolio consists of 2 assets and that you have decided to hold asset 1. What other asset should you hold to minimize the risk of your portfolio? Find the weight of each asset, the expected return of the portfolio and its risk, OP. 2. Consider 2 stocks with the following characteristics: stock Expected return Standard deviation 1 1 2 .15 10 with the correlation of return p=-1. (a) How much should be invested in each asset to obtain a risk-free portfolio? What is its expected return? (b) Assuming perfect capital markets, what is the valeu of the risk free rate, r/? 3. Suppose that there 4 assets: 1, 2, 3 and 4. Eri) = E(ru) = E(T) = E(ra) = .08 and 01 = 02 = 03 = 04 = 20. Also, P12 = .85, P13 = .60 and P14 = .45. Suppose that your portfolio consists of 2 assets and that you have decided to hold asset 1. What other asset should you hold to minimize the risk of your portfolio? Find the weight of each asset, the expected return of the portfolio and its risk, OP