You are considering two assets with the following characteristics:

E(R1) = 0,15 E(1) = 0,10

E(R2) = 0,20 E(2) = 0,20

Take the correlation between the assets as 0.

Use below options

1. w1 = 0,2 ; w2 = 0.8
2. w1 = 0,4 ; w2 = 0.6
3. w1 = 0,6 ; w2 = 0.4
4. w1 = 0,8 ; w2 = 0.2

1. Without calculation tell which option is the most preferable for return and why
2. Calculate the risk and return of the portfolios. Which is the most preferable from the risk point
3. In this option a mix method for choosing between portfolios will be created. Max (best) return will be rewarded with 100 points. Max (worst) risk will be penalized with minus 100 points

Example for part c is below. You are expected to solve in the same way

Return Risk POINTS PENALTIES TOTAL POINTS

A 0.1 0.05 100 -100 0

B 0.09 0.03 90 -60 30

C 0.05 0.02 50 -40 10

D 0.04 0.01 40 -20 20

B is the choice