Create a portfolio consisting of one risk-free asset and one risky asset where you wish to have a standard deviation of the portfolio of 25 %. The standard deviation of the risky asset is 30 %. How much should be invested in the risk-free asset and how much should be invested in the risky asset? b) Create a portfolio consisting of two stocks, A and B, with the goal of having as low risk as possible (risk is measured as the standard deviation of the portfolio). The standard deviation of A is 25 % while it is 30 % for B. The correlation coefficient between the two stocks is 0.6 How much should be invested in A and how much should be invested in B?

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a In order to create a portfolio consisting of one risk free asset and one risky asset with a standa... View the full answer