## Question

# Let R 1 and R 2 be the returns from two securities with E(R 1 ) = .03 and E(R 2 ) = .08, VAR(R

- Let R
_{ 1 }and*R*be the returns from two securities with_{2 }*E(R*.03 and E(R_{1 }) =_{ 2 }) = .08, VAR(R_{ 1 }) = .02, VAR(R_{ 2 }) = .05, and COV(R_{ 1 }, R_{ 2 }) = —.01.- Plot the set of feasible mean-variance combinations of return, assuming that the two securities above are the only investment vehicles available.
- If we want to minimizerisk, how much of our portfolio will we invest isecurity1?
- Find the mean and standard deviation of a portfolio that is 50% in security 1.

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### Financial Theory and Corporate Policy

**Authors:** Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri

4th edition

321127218, 978-0321179548, 321179544, 978-0321127211

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