LECTURES 5 36 6: Portfolio Choice & CAPM D You should be able to derive the E[Rp] and Var(Rp) of a portfolio of two assets if you have been given with their expected returns, variances / standard deviations and their correlation / covariance. You should know how to determine the weights of two assets forming the minimum variance portfolio. Discuss the importance of the correlation of two assets' returns in determining the Efcient portfolios in the absence of a risk-free asset. Given two assets and their characteristics: 0 Explain investors' consumption 3:: investment decisions in the absence of a risk-free asset. 0 Explain investors1 consumption 8: investment decisions in the presence of a risk-free asset (i.e. Two-Fund Separation Theorem). Outline the CAPM's assumptions and derive the Security Market Line. Discuss the Properties, and/ or Applications, and/or Extensions of CAPM. Exercise similar to example 2 in Lecture 6 slides and discussion