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

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

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Financial Theory and Corporate Policy

Financial Theory and Corporate Policy

ISBN: 978-0321127211

4th edition

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

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Posted Date: November 17, 2019 11:54:04
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