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Suppose the characteristics of security A and B are given as follow: Stock A Stock B Expected return 12% 18% Standard deviation 8% 15% Correlation
Suppose the characteristics of security A and B are given as follow: Stock A Stock B Expected return 12% 18% Standard deviation 8% 15% Correlation coefficient between return of stock A and B is 0.5. a. What is the expected value and standard deviation of return of minimum variance portfolio constructed from stock A and B? b. What are the weights of stock A and B in the optimal risky portfolio if risk free rate is 2%
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