Portfolio Variance You manage a large portfolio of Australian companies, composed of mining and manufacturing stocks. The mining stocks have an expected return of 5% and a standard deviation of 1.2%. The manufacturing stocks have an expected return of 8% and a standard deviation of 4.2%. The correlation coefficient between the two assets is 0.24. (a) Derive the variance and return of the combined portfolio. (4 marks) (b) What are the weights in the mining and manufacturing firm portfolios that give the lowest variance of the combined portfolio? What is the return of this portfolio? (c) Draw the efficient frontier for the combination of these two assets if the correlation coefficient is (i) 1, (ii) 0 , (iii) 0.5 or (iv) 1 . (You do not need to label exact values) (i4 marks) A risk-free asset is now available and yielu's 'auciest-2:5\%. Assumie that the market portfolio's expected return is 6.5%. (d) What is the Capital Market Line (CML)? What is the market portfolio and who holds it in their portfolio? (4 marks) (e) What are the weights in the two stock types that give the market portfolio? (2 marks) (f) What is the slope of the CML? (3 marks) Portfolio Variance You manage a large portfolio of Australian companies, composed of mining and manufacturing stocks. The mining stocks have an expected return of 5% and a standard deviation of 1.2%. The manufacturing stocks have an expected return of 8% and a standard deviation of 4.2%. The correlation coefficient between the two assets is 0.24. (a) Derive the variance and return of the combined portfolio. (4 marks) (b) What are the weights in the mining and manufacturing firm portfolios that give the lowest variance of the combined portfolio? What is the return of this portfolio? (c) Draw the efficient frontier for the combination of these two assets if the correlation coefficient is (i) 1, (ii) 0 , (iii) 0.5 or (iv) 1 . (You do not need to label exact values) (i4 marks) A risk-free asset is now available and yielu's 'auciest-2:5\%. Assumie that the market portfolio's expected return is 6.5%. (d) What is the Capital Market Line (CML)? What is the market portfolio and who holds it in their portfolio? (4 marks) (e) What are the weights in the two stock types that give the market portfolio? (2 marks) (f) What is the slope of the CML