Question 1:

Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 15% and a standard deviation of 27%. B has an expected rate of return of 7% and a standard deviation of 13%. What are the weights of A and B in the minimum variance portfolio Whats the return for this minimum variance portfolio? (5 Marks)

Question 2: Consider the following probability distribution for stocks A and B:

1. The expected rates of return of stocks A and B are _____ and _____, respectively. (2 Marks)
2. The standard deviations of stocks A and B are _____ and _____, respectively. (2 Marks)
3. What is the coefficient of correlation between A and B ? (2 Marks)
4. If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation? (4 Marks)