Here are the risk and return estimates for the T-Note Portfolio (#1) and the S&P 500 Portfolio (#2) for the coming year:

	T-Note (#1)	S&P 500 (#2)
Expected Return E(R)	6%	10%
Std, Deviation ()	12%	20%

Correlation (T-Note, S&P 500) = 0

Correlation (T-Note, S&P 500) = 0 What are the weights (W1 and W2) of the minimum risk portfolio?

What is the expected return and risk of the minimum risk portfolio?

Which, if any, of the following portfolios are dominated by the minimum risk portfolio? (No calculations needed)

Portfolio #	Weight in T-Note	Weight in S&P 500
1	1	0
2	.8	.2
3	.6	.4
4	.4	.6
5	.2	.8
6	0	1

For the following questions assume you can invest (lend) and borrow at a risk free rate of 2 percent and the optimal portfolio weights are W1=.58 and W2=.42 Which (if any) of the above portfolios are dominated under the lending/borrowing assumption?

If you had $10,000 of your own funds to invest, what is your expected return if you invest $4000 in the risk free rate and $6000 in the optimal portfolio?

What is the expected return and risk if you buy the S&P 500 Portfolio on margin (MR=.40). Margin borrowing cost is 2 percent.