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The expected return and standard deviation for two securities, A and B, are as follows: Security Expected Standard Return Deviation A 5% 2% B 10%

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The expected return and standard deviation for two securities, A and B, are as follows: Security Expected Standard Return Deviation A 5% 2% B 10% 5% The correlation between the two assets are -0.7. (a) Elton has a portfolio with a 6% expected return and 1.15% standard deviation. Why is this portfolio inefficient? (b) What would be the expected return of an efficient portfolio that carries the same level of risk as Elton's portfolio? (SD=1.15%) The expected return and standard deviation for two securities, A and B, are as follows: Security Expected Standard Return Deviation A 5% 2% B 10% 5% The correlation between the two assets are -0.7. (a) Elton has a portfolio with a 6% expected return and 1.15% standard deviation. Why is this portfolio inefficient? (b) What would be the expected return of an efficient portfolio that carries the same level of risk as Elton's portfolio? (SD=1.15%)

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