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Asset 1 has an expected return of 1 0 % with a standard deviation of 2 5 % , and asset 2 has an expected
Asset has an expected return of with a standard deviation of and asset has an
expected return of and a standard deviation of The covariance between the returns
is and the riskfree rate is
a What is the optimal portfolio consisting of risky assets and riskfree asset if you want
an average return of Answer.
b Can you find a portfolio consisting of risky and riskfree assets with average return of
and variance of return Why or why not? Answer.
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