Suppose you invest your money into two stocks in the proportion (1, 2)

If the stocks have risk _{1 2} and their correlation is , the risk of the investment, , satisfies the equation: ² = ₁² _1² + ₂² ₂² + 2_{1 2 1 2}

You are given two stocks where ₁ = 0.1 , ₂ = 0.2 = 0.4

You wish to find the optimal portfolio that minimizes the value of ²

c) Solve the equation from part b) using Excel and obtain the value of (1, 2) which optimizes the investment. (2 marks)