Question Five. An investor can only invest in the shares of two companies - Alpha Co Ltd and Beta Co Ltd. The expected return on shares in Alpha is EA and the expected return on shares in Beta is Ep. The variances of the returns are VA and VB respectively and CAB is their covariance. A proportion XA is invested in Alpha with XB being invested in Beta. 1. State the formulae for: (i) the expectation return, and (ii) the variance of the return on the portfolio of the two shares 2. Prove that the minimum variance of the portfolio occurs when: VB-CAB XA - VA-2CAB+VB [8 Marks]