#2. The risk-free asset has a return of 2.5% and there are two risky assets in the market: Asset A has an expected return of 5% and standard deviation of 2.5%; Asset B has an expected return of 7.5% and a standard deviation 5%. The correlation of returns between the two risky assets is +0.5. If you invest only in the risk-free asset and asset A, what proportions would you invest to generate a portfolio with an expected return of 10%? How would you construct a portfolio of the risk-free asset and Asset B with an expected return of 10%? Which of these two portfolios would dominate? Check by comparing the risk positions of the two portfolios. The optimal risky portfolio (to combine with the risk-free asset) is comprised of 2/3 invested in A and 1/3 invested in B. What would this optimal risky portfolio have as an expected return and level of risk? If you consider investing in all three assets (risk-free, A, and B), what proportions would you invest in each to produce a portfolio with an expected return of 5% with minimal risk? What level of risk is associated with this blended portfolio? #2. The risk-free asset has a return of 2.5% and there are two risky assets in the market: Asset A has an expected return of 5% and standard deviation of 2.5%; Asset B has an expected return of 7.5% and a standard deviation 5%. The correlation of returns between the two risky assets is +0.5. If you invest only in the risk-free asset and asset A, what proportions would you invest to generate a portfolio with an expected return of 10%? How would you construct a portfolio of the risk-free asset and Asset B with an expected return of 10%? Which of these two portfolios would dominate? Check by comparing the risk positions of the two portfolios. The optimal risky portfolio (to combine with the risk-free asset) is comprised of 2/3 invested in A and 1/3 invested in B. What would this optimal risky portfolio have as an expected return and level of risk? If you consider investing in all three assets (risk-free, A, and B), what proportions would you invest in each to produce a portfolio with an expected return of 5% with minimal risk? What level of risk is associated with this blended portfolio