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Consider the following table: Portfolio Expected Return Variance A 9 % 0.2025 B 13 % 0.3025 Correlation = 1 a. Calculate the expected rate of

Consider the following table:

Portfolio Expected Return Variance A 9 % 0.2025 B 13 % 0.3025 Correlation = 1

a. Calculate the expected rate of return on this risk-free portfolio? (7 points)

b. The rate on T-bills is 2%. Which of the above portfolios would you prefer to hold in combination with T-bills and why?

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