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You have observed the following information below: Security Expected return Standard deviation 1 9% 0.3 2 7% 0.2 Now, you know the correlation between security
You have observed the following information below:
Security | Expected return | Standard deviation |
1 | 9% | 0.3 |
2 | 7% | 0.2 |
Now, you know the correlation between security 1 and 2 is -1. Please find 1) the minimum standard deviation portfolios weights; 2) the standard deviation of the minimum standard deviation portfolio; 3) the expected return of the minimum standard deviation portfolio; 4) In a normal market, what must be the risk-free rate of interest? (Hint: please refer to pages 44-47 of slide deck 9).
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