Mrs. Goodey has $15000 and wants to build a portfolio that has a rate of return of % by investing in just two securities or one security and cash.

 

The risk-free rate is 4.97% . The correlation coefficients is ρ12 = 0.85. The risk-free rate has a standard deviation of zero and a correlation of zero with all the securities. 

Which portfolio is the efficient portfolio (the one with the smallest risk)? In your answer give the composition of the portfolio and the weights?

Security Price per Rate share S1 S2 $67 $67 return 17.61 15.45 of Standard deviation 0.27 0.21