3. = B Consider a mean-variance portfolio model with two securities, with respective returns SA and Sp, where the expected return E[sk] = 0.25E[S2] and the variance of return V[S] = 0.25V [SA] Let the correlation between the returns on the two securities be p. (i) Determine, in terms of E[SA], the expected return on the minimum variance portfolio if: (a) p= 0 (02 marks) (b) p= 1 (02 marks) (ii) (a) Calculate the variance of the return on the minimum variance portfolio for part (i)(b). (b) Comment on the risk in this portfolio. (02 marks) = 2/5 4. 3. = B Consider a mean-variance portfolio model with two securities, with respective returns SA and Sp, where the expected return E[sk] = 0.25E[S2] and the variance of return V[S] = 0.25V [SA] Let the correlation between the returns on the two securities be p. (i) Determine, in terms of E[SA], the expected return on the minimum variance portfolio if: (a) p= 0 (02 marks) (b) p= 1 (02 marks) (ii) (a) Calculate the variance of the return on the minimum variance portfolio for part (i)(b). (b) Comment on the risk in this portfolio. (02 marks) = 2/5 4