Question $2$:

The expected returns and standard deviation of returns for two securities are as follows:

Security Z Security Y

Expected Return $15\%35\%$

Standard Deviation $20\%40\%$

The correlation between the returns is $+0\mathrm{.}25.$ Answer questions A to C below:

A$.$ Calculate the expected return and standard deviation for the following feasible portfolios:

i$.$ all in Z

ii$.75\%$ of portfolio value in Z and $25\%$ of portfolio value in Y

iii. $50\%$ of portfolio value in Z and $50\%$ of portfolio value in Y

iv$.25\%$ of portfolio value in Z and $75\%$ of portfolio value in Y

v$.$ all in Y

B$.$ Use the feasible risky portfolios in part A to draw the investment opportunity set on the Expected return$-$ volatility space in detail. Use excel or draw it accurately to demonstrate the actual values $($not just the shape of the frontier$).$

C$.$ Of the five portfolios in part $($A$),$ can you find those that will not be held by an investor who prefers higher expected return and lower standard deviation?