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Assume two portfolios P and P2 with returns r = 0.03 +0.1f, r2 = 0.0025 +0.025f. a. Write an expression that adds/subtracts some combination


 

Assume two portfolios P and P2 with returns r = 0.03 +0.1f, r2 = 0.0025 +0.025f. a. Write an expression that adds/subtracts some combination of P1 and P2 to generate riskless returns, and indicate what the riskless return is (3 marks). b. Assume you have no wealth. How do you obtain these riskless returns by buying/selling P and P2 and/or borrowing from/lending to the bank (2 marks)?

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