Asset L offers an expected rate of return of 10% with a standard deviation of 25%. Asset J offers an expected rate of return of 5% with a standard deviation of 30%. Assume that the risk-free interest rate is zero.

(a) Suppose Assets L and J are perfectly positively correlated. Draw a graph illustrates why a rational investor would or would not hold Asset J in ones portfolio. (Can provide verbal support to the graph)

(b) Suppose Assets L and J are perfectly negatively correlated, form a 2-asset portfolio that has zero risk (i.e., standard deviation of return equals zero).