5. Suppose that there are only two risky assets, 1 and 2, in the economy and...

 

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5. Suppose that there are only two risky assets, 1 and 2, in the economy and the mean-variance frontier is constructed from these two risky assets. No risk-free asset is available. Furthermore, we have r = ~N AKL 1 where . Without loss of generality, you can assume zero correlation between the two assets, i.e., P = 0. Note also that the normality assumption is not necessary for this problem. (a) Suppose that investor A believes that the "market portfolio" is W. W = 14 W2A while investor B believes that the "market portfolio" is 1B WB = W2B and WW. Given these facts, what beta value will each investor calculate for assets 1 and 2? A 5. Suppose that there are only two risky assets, 1 and 2, in the economy and the mean-variance frontier is constructed from these two risky assets. No risk-free asset is available. Furthermore, we have r = ~N AKL 1 where . Without loss of generality, you can assume zero correlation between the two assets, i.e., P = 0. Note also that the normality assumption is not necessary for this problem. (a) Suppose that investor A believes that the "market portfolio" is W. W = 14 W2A while investor B believes that the "market portfolio" is 1B WB = W2B and WW. Given these facts, what beta value will each investor calculate for assets 1 and 2? A