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- Suppose you are building a two-asset portfolio with either stocks A and B or Stocks C and D. Stock A Stock B Stock C

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- Suppose you are building a two-asset portfolio with either stocks A and B or Stocks C and D. Stock A Stock B Stock C Stock D Expected Return 20% 26% 18% 22% Standard 10% 13% 14% 15% Deviation Explain, with the aid of a diagram, the conditions under which the optimal portfolio with stocks C and D dominates the optimal portfolio with stocks A and B. (10 marks) . Explain, with the aid of an equation, the conditions under which variances of stock returns are unimportant in the determination of the risk of a portfolio. (10 marks) - Suppose you are building a two-asset portfolio with either stocks A and B or Stocks C and D. Stock A Stock B Stock C Stock D Expected Return 20% 26% 18% 22% Standard 10% 13% 14% 15% Deviation Explain, with the aid of a diagram, the conditions under which the optimal portfolio with stocks C and D dominates the optimal portfolio with stocks A and B. (10 marks) . Explain, with the aid of an equation, the conditions under which variances of stock returns are unimportant in the determination of the risk of a portfolio. (10 marks)

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