Consider a single-step market model with n = 2 risky assets, where returns and covariances are given by

₁ = 5%, ₂ =2%, ²₁ = 5%, ²₂= 2%, c₁₂ = 3%.

i) What is the condition on _i, _i, c₁₂ ensuring that the minimum variance portfolio does not require short selling? State your answer in a form of a theorem and prove it.

ii) Can your theorem be simply generalized to the case of more than two assets? Justify your answer.

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