Question 2, Version 1

Part A

What will be the weights, the expected return, the variance, and the standard deviation of the minimum variance portfolio combining the stocks below. (Refer the template for Chapter 10, exercise 13 for guidance)

(5 marks)

	Stock X	Stock Y
Mean Return	20.0%	15.00%
Variance	.10	.070
Sigma	?	?
Covariance of returns	-.020

Question 2, Version 1

Part B

Using 10% increments (0% X, 100% Y, 10% X, 90% Y, etc.) calculate and graph the efficient frontier of the stock portfolios composed of stocks X and Y.

(5 marks)