Question: Asset A: Expected Return (15%), Standard Deviation (20%) Asset B: Expected Return (25%), Standard Deviation (35%) Correlation of Returns = 0.4 Which of the following

Asset A: Expected Return (15%), Standard Deviation (20%)

Asset B: Expected Return (25%), Standard Deviation (35%)

Correlation of Returns = 0.4

Which of the following is the best answer?

a) The minimum variance portfolio is solved by finding a portfolio that has a covariance with Asset A that is equal to its covariance with Asset B

b) The minimum variance portfolio is the same as the tangency portfolio in this example provided that the correlation between the returns of Assets A and B is 0.4.

c) If the risk-free rate is 5%, the tangency portfolio has a covariance with Asset B that is exactly twice as large as its covariance with Asset A.

d Answers a) and c) only

e) All of the above are correct answers

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