Question: A and B are two risky assets. Their expected returns are E[Ra], E[Rb], and their standard deviations are A,B. A < B and asset A

A and B are two risky assets. Their expected returns are E[Ra], E[Rb], and their standard deviations are A,B. A< B and asset A and asset B are positively correlated (A, B > 0). Suppose asset A and asset B are comprised in a portfolio with positive weight in both and please check all the correct answers below.

() There are only gains from diversification if A, B is not equal to 1.

() The portfolio may have a zero variance

() A may be smaller than the variance of the portfolio

() The portfolio's expected return cannot be larger than 0.5(E[Ra] + E[Rb]).

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