Question: Suppose you plan to create a portfolio with two securities: Tobin and Bino, with weights to be greater than or equal to zero. The expected

  1. Suppose you plan to create a portfolio with two securities: Tobin and Bino, with weights to be greater than or equal to zero. The expected return of Tobin is 10 percent with a standard deviation of 12 percent. The expected return of Bino is 16 percent with a standard deviation of 20 percent. The correlation between the two securities is 0.30.

a) What percentage of your investment should be invested in Tobin to obtain a portfolio standard deviation of 12.2638 percent?

b) What is the expected return of the portfolio?

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