Suppose that Colin wants to combine Assets X and Y to form a riskless portfolio. Suppose that there are two states of the world: Good and Bad. Consider the following return distribution of assets X and Y: Asset Xs rate of return is 10% in the good state, 2% in the bad state. Asset Ys rate of return is 4% in the good state, 16% in the bad state.

(a) What are portfolio weights of assets X and Y?

(b) What is riskless rate?

(10 points) Suppose that Colin wants to combine Assets X and Y to form a riskless portfolio. Suppose that there are two states of the world: Good and Bad. Consider the following return distribution of assets X and Y: Asset X's rate of return is 10% in the good state, 2% in the bad state. Asset Y's rate of return is 4% in the good state, 16% in the bad state. (a) (5 points )What are portfolio weights of assets X and Y? (b) (5 points) What is riskless rate