(4.4) Consider two stocks S and S2 with the following characteristics: Mi = 10%, M2 = 20% 01 = 0.3, 02 = 0.15, p=-0.5. A manager wishes to distribute his wealth evenly between the two assets. In addition he also wants to invest in a risk free asset. He will invest in total 100 000. (a) How much money will he invest in the risky assets and how much in the risk free asset if the risk free rate is r = 5% and the target of the investor is to have expected return of 7.5%? (b) Amongst investments with expected return 7.5%, is the investment from (a) an investment with the lowest risk? If not, then give an example of a portfolio which would dominate this investment. (Hint: Investing a = = into the risk free asset and 1 a = in asset two, gives an example.) (4.4) Consider two stocks S and S2 with the following characteristics: Mi = 10%, M2 = 20% 01 = 0.3, 02 = 0.15, p=-0.5. A manager wishes to distribute his wealth evenly between the two assets. In addition he also wants to invest in a risk free asset. He will invest in total 100 000. (a) How much money will he invest in the risky assets and how much in the risk free asset if the risk free rate is r = 5% and the target of the investor is to have expected return of 7.5%? (b) Amongst investments with expected return 7.5%, is the investment from (a) an investment with the lowest risk? If not, then give an example of a portfolio which would dominate this investment. (Hint: Investing a = = into the risk free asset and 1 a = in asset two, gives an example.)