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Suppose that there are only two stocks in the world. Stock X earns 12% with 20% volatility. Stock Y earns 18% with 24% volatility. Both
Suppose that there are only two stocks in the world. Stock X earns 12% with 20% volatility. Stock Y earns 18% with 24% volatility. Both X and Y are correlated 80%. The risk-free rate is 3%. 1. Construct the most efficient portfolio. 2. Compute the markets expected return and its standard deviation.
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