1,1 (b) The expected return and standard deviation of return on Asset 1 is ER, and o, respectively. The expected return and standard deviation of return on Asset 2 is ER, and on respectively. The returns on these assets are uncorrelated. Assume that W, 1 of the index (market) portfolio is invested in Asset 1 and W1 2 =1-W 1 of the index (market) portfolio is invested in Asset 2. Use values for ER, = 20% ,0, = 10% ,ER, = 10% , 02 6% and W2,1 =0.5. 1,2 1,1 = = = > = (i) What is the expected return on the zero-beta portfolio? (ii) What is the vector of weights in the global minimum-variance portfolio? (iii) What is the covariance between the global minimum-variance portfolio and the zero-beta portfolio? (iv) What is the equation of the security market line? 1,1 (b) The expected return and standard deviation of return on Asset 1 is ER, and o, respectively. The expected return and standard deviation of return on Asset 2 is ER, and on respectively. The returns on these assets are uncorrelated. Assume that W, 1 of the index (market) portfolio is invested in Asset 1 and W1 2 =1-W 1 of the index (market) portfolio is invested in Asset 2. Use values for ER, = 20% ,0, = 10% ,ER, = 10% , 02 6% and W2,1 =0.5. 1,2 1,1 = = = > = (i) What is the expected return on the zero-beta portfolio? (ii) What is the vector of weights in the global minimum-variance portfolio? (iii) What is the covariance between the global minimum-variance portfolio and the zero-beta portfolio? (iv) What is the equation of the security market line