Problem 4

Stock 1 has an expected return of 17% and a standard deviation of 33%. Stock 2 has an expected return of 3% and a standard deviation of 17%. Their correlation is 0.63.

Part 1: What is the weight on stock 1 in the minimum variance portfolio? _____(3 decimals)

Part 2: What is the expected return of the minimum variance portfolio? ______(4 decimals)

Part 3: What is the variance of the minimum variance portfolio? _____(4 decimals)

Part 4 What is the standard deviation of the minimum variance portfolio? ______(3 decimals)

(Please show how you got each answer in excel)