Q2 The risk-free rate of return is 3.5%. Ken has $1,000,000 to invest and can form a portfolio of shares in two public companies:

"Dig-it-up-ship-it-out", which has a focus on mining and export; and "Knowledge Workers United", a management consultancy business.

Part A) What are the weights on the various assets in the minimum variance portfolio that Ken can achieve? [1 point]

Part B) What is the maximum expected portfolio return that can be achieved by Ken if he does not borrow to invest in risky assets and does not hold a short position in either of the risky assets? [1 point]

Part C) If Ken cannot borrow more than $100,000 at the risk-free rate of return when forming the portfolio and cannot hold a short position in either of the risky assets, what is the maximum expected return that he can achieve? What standard deviation is associated with that maximum expected portfolio return? [4 points]

Part D) If Ken cannot borrow or lend at the risk-free rate of return, what are the weights on the risky assets that define the portfolio with minimum possible variance? [4 points]

Asset average return return standard deviation return correlation dig-it-up-ship-it-out knowledge workers united 5% 9% 7% 20% 0.1