Question $5$

An analyst has made the following return projections for each of three possible outcomes with

an equal likelihood of occurrence:

Asset Outcome $1(\%)$ Outcome $2(\%)$ Outcome $3(\%)$ Expected return $(\%)$

$112606$

$212066$

$306126$

Which pair of assets is perfectly negatively correlated?

A Asset $1$ and Asset $2$

B Asset $1$ and Asset $3$

C Asset $2$ and Asset $3$

If the analyst constructs two$-$asset portfolios that are equally weighted, which pair of assets has

the lowest standard deviation?

A Asset $1$ and Asset $2$

B Asset $1$ and Asset $3$

C Asset $2$ and Asset $3$

If the analyst constructs two$-$asset portfolios that are equally weighted, which pair of assets provides the least amount of risk reduction?

A Asset $1$ and Asset $2$

B Asset $1$ and Asset $3$

C Asset $2$ and Asset $3$