Question: Consider the following three assets: Asset As expected return is 5% and return standard deviation is 25%. Asset Bs expected return is 8% and return

Consider the following three assets: Asset As expected return is 5% and return standard deviation is 25%. Asset Bs expected return is 8% and return standard deviation is 32%. Asset C is a risk-free asset with 2% return. The correlation between assets A and B is 0.3. 8. Constructing a portfolio from assets A and B such that the expected return of the portfolio equals 3%, find the portfolio weights of assets A and B and compute the return standard deviation of the portfolio. (a) weight = 5/3, Std(rp) = 0.48 (b) weight = 5/3, Std(rp) = 0.20 (c) weight = 8/3, Std(rp) = 0.04 (d) weight = 8/3, Std(rp) = 0.66

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