consider a 12 months potential investment in 2 securities.security 1 has an expected return of 6% per annum and that of security 2 is 8% per annum.the standard deviation of the return of security 1 is 9% and security 2 is 10%.the risk free rate is 6.5% and correlation between the 2 securities is 0.4%.a which combination of the 2 securities will result in expected return that exceed the risk free rate?b.what is the portfolio volatility for each of the combinations identified in a above?c. which of all the possible portfolios lie on the efficient frontier?

QUESTION THREE Consider a 12 months potential investment in two securities. Security 1 has an expected return of 6% per annum and that of security 2 is 8% per annum. The standard deviation of the returns for security 1 9% and for security 2 it is 10%. The risk-free rate is 6.5% and the correlation between the two securities is 0.4. Required: A. Which combination of the two securities will result in expected returns that exceed the risk free rate? [6 Marks] B. What is the portfolio volatility for each of the combinations identified in (a) above? [6 Marks] C. Which of all the possible portfolios lie on the efficient frontier? [8 Marks] [TOTAL: 20 MARKS]