Question: Given the expected returns, standard deviations, and the covariance or correlation coefficient of two assets, how do you calculate the expected return and standard deviation

  1. Given the expected returns, standard deviations, and the covariance or correlation coefficient of two assets, how do you calculate the expected return and standard deviation of a specific portfolio of these two assets?
  2. How to calculate the diversification effect of a portfolio of two assets?
  3. What do all points that cluster in an umbrella shape in the RP p plane represent. What is the above-mentioned cluster called?
  4. What is the North-West direction on the above-mentioned plane desirable?
  5. How does Markowitz eliminate the no-good portfolios from that cluster?
  6. What does he end up with after hes done eliminating those no-good portfolios? What do we call the remaining ones?
  7. What are the indifference curves of an investor? Indifference to what? How do we use these indifference curves?

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