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Stocks offer an expected rate of return of 18%, with a standard deviation of 22%. Gold offers an expected return of 10% with a standard

Stocks offer an expected rate of return of 18%, with a standard deviation of 22%. Gold offers an expected return of 10% with a standard deviation of 30%.

a. In light of the apparent inferiority of gold with respect to average return and volatility, would anyone hold gold in his portfolio?

b. Assume that the correlation between Stocks and Gold is -0.5. Find the weights ws and wG of the efficient risky portfolio which is invested in Stocks and Gold and which has an expected return of 15%.

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