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Consider a market that consists of 2 independent stocks with the following data for the associated returns: M = 0.1, M = 0.4, Roy
Consider a market that consists of 2 independent stocks with the following data for the associated returns: M = 0.1, M = 0.4, Roy wishes to construct a portfolio V in this market with high expected return and low risk. For this, he decides to minimize of - v. 01 0.2, = er 2023 0.25. (a) (4 Points) Find a portfolio that achieves this goal. (b) (3 Points) Find the mean and the variance of (the return of) the portfolio you found in part (a). (c) (3 Points) Suppose Roy has $1000 to invest. Explain what he should do with his money and what is the expected amount that he will obtain after one year (note that by convention the return is calculated for one year).
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