Problem $3.$

Consider the following two stocks, K and L$.$

Stock Expected

Return $\%$

Standard

deviation $\%$

K $1518$

L $2025$

The correlation between K and L is $0\mathrm{.}1.$ Assume short sales are allowed.

a$)$ What is the minimum variance combination of K and L$?$ What is the expected return

and standard deviation of the minimum variance portfolio?

b$)$ Can $30\%$ rate of return be achieved by combining the two stocks? Show and also

calculate the standard deviation of that portfolio