2. [Portfolio Diversification Benefit; Efficient Frontier] (45 pts) Return and risk characteristics of two ETFs are given in the following table: ETE Expected rate of return Expected risk level #1 (SPY) 30% 33% #2 (ARKK) 85% 50% Calculate the expected returns and expected standard deviations of a two-asset portfolio having a correlation coefficient of 50% under the following conditions. (20 pts) Efficient Frontier A Conditions Weight of Weight of Expected portfolio's Expected portfolio's #1 SPY #2 ARKK return risk level I 100% 0% Ii 75% Iii 50% IV 25% V 5% Then, calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0% under the following conditions. (20 pts) Efficient Frontier B Conditions Weight of Weight of Expected portfolio's Expected portfolio's #2 ARKK return risk level #1 SPY I 100% 0% Ii 75% Iii 50% Iv 25% V 5% Which efficient frontier is closer to the vertical axis, i.e., which efficient frontier represents a more attractive trade-off relation between portfolio risk and portfolio return? (5 pts) Your answer (choose one): Efficient Frontier A Efficient Frontier B or 2. [Portfolio Diversification Benefit; Efficient Frontier] (45 pts) Return and risk characteristics of two ETFs are given in the following table: ETE Expected rate of return Expected risk level #1 (SPY) 30% 33% #2 (ARKK) 85% 50% Calculate the expected returns and expected standard deviations of a two-asset portfolio having a correlation coefficient of 50% under the following conditions. (20 pts) Efficient Frontier A Conditions Weight of Weight of Expected portfolio's Expected portfolio's #1 SPY #2 ARKK return risk level I 100% 0% Ii 75% Iii 50% IV 25% V 5% Then, calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0% under the following conditions. (20 pts) Efficient Frontier B Conditions Weight of Weight of Expected portfolio's Expected portfolio's #2 ARKK return risk level #1 SPY I 100% 0% Ii 75% Iii 50% Iv 25% V 5% Which efficient frontier is closer to the vertical axis, i.e., which efficient frontier represents a more attractive trade-off relation between portfolio risk and portfolio return? (5 pts) Your answer (choose one): Efficient Frontier A Efficient Frontier B or