Question 2 (15 points) Suppose you can invest in two stocks. Let X and Y be random variables who denote their returns. Further, you know that E[X] = E[Y] =p and Var(X) = Var(Y) = 02. As always, Pxy denotes their correlation. Consider the two following investment strategies: 1. Buy 5 shares of the first stock (each with return X) and 1 share of the second stock (each with return Y) 2. Buy 3 shares of the first stock (each with return X) and 3 share of the second stock (each with return Y) For which values of u, 04, Pxy would you prefer Strategy 2 to Strategy 1 assuming you prefer a higher mean and a lower variance of the total return of the portfolio? Question 2 (15 points) Suppose you can invest in two stocks. Let X and Y be random variables who denote their returns. Further, you know that E[X] = E[Y] =p and Var(X) = Var(Y) = 02. As always, Pxy denotes their correlation. Consider the two following investment strategies: 1. Buy 5 shares of the first stock (each with return X) and 1 share of the second stock (each with return Y) 2. Buy 3 shares of the first stock (each with return X) and 3 share of the second stock (each with return Y) For which values of u, 04, Pxy would you prefer Strategy 2 to Strategy 1 assuming you prefer a higher mean and a lower variance of the total return of the portfolio