Question: Portfolio Expected return Standard deviation X 7.5% 5% Y 5% 10% Z 10% 15% Consider an investor who invests $50,000 in a portfolio consisting of

Portfolio Expected return Standard deviation

X 7.5% 5%

Y 5% 10%

Z 10% 15%

Consider an investor who invests $50,000 in a portfolio consisting of X and Z. $10,000 of that investment was funded with risk-free borrowing. The expected return of the investors portfolio is 9.375%. i. Calculate the dollar amounts invested in each of X and Z. (4 marks) ii. If the correlation between X and Z is 2/3, what is the standard deviation of the investors portfolio?

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