It Belongs to Financial Economics

` Suppose there are two uncorrelated assets (i = 1,2). Each has variance of = of = 1 and the expected rates of return are E (r) = 1%, E (r2) = 3%, respectively. (a) t By solving the Markowitz's mean-variance problem, derive the individual asset's portfo- lio weight wi (i = 1,2) as a function of the required expected rate of return (r). (b) ) Derive the equation which represents the efficient frontier. [Hint: Derive an equation to express the portfolio standard deviation (op) as a function of the required expected return (7).]