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Assume that a world has only two risky assets A and B . It is known that E ( rA ) 5 % A =

Assume that a world has only two risky assets A and B

.

It is known that E

(

) 5 %

= 5 % .

(

) - 5 %

= 10 %,

and the correlation of the two assets is zero. How would a risk

-

averseinvestor split her money between the two assets so as to construct her optimal portfolio?

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