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Suppose the universe of available securities include only two risky stock funds, A and B, and T-bills The correlation between fund A and fund B

Suppose the universe of available securities include only two risky stock funds, A and B, and T-bills

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The correlation between fund A and fund B is 0.

Q) (4) Without any calculation, will the above investor invest more or less in T-bills if the correlation between A and B increases from 0 to 0.10? Briefly explain the intuition.

Fund A Fund B T-bills E (r) 12% 20% 2% 20% 40% 0%

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