Asset A offers an expected rate of return of 10% with a standard deviation of 25%. Asset B offers

an expected rate of return of 5% with a standard deviation of 30%. Assume that the risk-free

interest rate is zero.

Show with calculations that there is NO diversification benefit resulting from forming the

portfolio. [Hint: Take a look at Supple. Notes on Portfolio Risk Changes with Correlation

under Topic 2 on Soul and recall the implications of linear and curvy efficient frontiers under

different correlation assumptions.]