$8-$ Stocks offer an expected rate of return of $18\%,$ with a standard deviation of $22\%.$ Gold offers an expected

return of $10\%$ with a standard deviation of $30\%.(2$ Point$)$

a$.$ In light of the apparent inferiority of gold with respect to both mean return and volatility, would

anyone hold gold? If so$,$ demonstrate graphically why one would do so$.$

b$.$ Given the data above, re$-$answer $(a)$ with the additional assumption that the correlation

coefficient between gold and stocks equals $1.$ Draw a graph illustrating why one would or would

not hold gold in one's portfolio. Could this set of assumptions for expected returns, standard

deviations, and correlation represent an equilibrium for the security market?