Assume analysts provide the following types of information Assume short sales are allowed Stock Mean Return Standard Deviation A 10 8 B 12 10 C 18 16 risk free rate 5 b) What is the minimum variance portfolio of A and B What is the standard deviation of this portfolio Explain briefly why the standard deviation of the portfolio is lower than that of A and B

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Assume analysts provide the following types of information. Assume short sales are allowed. Stock Mean Return Standard Deviation A 10% 8% B 12% 10% C

Assume analysts provide the following types of information. Assume short sales are allowed.

Stock	Mean Return	Standard Deviation
A	10%	8%
B	12%	10%
C	18%	16%
risk free rate	5%

b) What is the minimum variance portfolio of A and B? What is the standard deviation of this portfolio? Explain briefly why the standard deviation of the portfolio is lower than that of A and B.

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