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Assume that an economy has 2 stocks: A and B . Additionally, there is a risk - free asset with an expected return of 5
Assume that an economy has stocks: A and B Additionally, there is a
riskfree asset with an expected return of The expected return of stock
A is with a standard deviation of The expected return of stock B
is with a standard deviation of The correlation between both
stocks is The market capitalization of is $ and the
market capitalization of is $ points
a Is a portfolio that invests in in and in the riskfree
asset efficient?
b Is a portfolio that invests in in and in the riskfree
asset efficient?
c If any of the portfolios in the previous two points are inefficient, how
much more expected return would we be able to obtain in an efficient
portfolio with the same risk as the portfolio in question? What would be
the weights in A B and the riskfree asset of this efficient portfolio?
hint: Use the capital market line
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