Question 1: This question is consist of 2 Part (A&B) in which both are relevant to each other.

A.

Yingying has been oifered a choice between two portfolios of nancial assets. Each portfolio is made up of sharu in only two companion. The rst portfolio consists of sharu in company A and company B, both weighted equally. The second portfolio consists of shares in company C and company D, both weighted equally. Yingying is told that the expected value of the returns of the two portfolios is exactly the same. So the choice between the two portfolios will depend solely upon whether one is more risky than the other. Yingying has been told that the variance of returns for company A is the same as that for company C and that the variance of returns for company B is the same as that for company D. Yingying has also been told that returns for company A and for company B are not correlated at all (pAB = D in this case) while the returns for company C and for company D are perfectly and negatively correlated (p09 2 1 in this case). If Yingying is risk lover, which portfolio will she choose and why