Question: The following table describes expected returns, standard deviations, and the correlation between two risky assets. Use this information to answer the following questions. Risky Asset

  1. The following table describes expected returns, standard deviations, and the correlation between two risky assets. Use this information to answer the following questions.

Risky Asset 1

Risky Asset 2

Average Return

0.06

0.10

Standard Deviation of Return

0.12

0.35

Correlation

-0.30

  1. Determine the minimum variance portfolio for these two assets. Report the weights invested in each, the portfolio average return, and the portfolio standard deviations.
  2. Describe the concentration of investment in the two assets.
  3. Identify a portfolio allocation that would be inefficient. Why would this be an unwise investment?
  4. Identify a portfolio allocation that would be efficient. Why would this be a wise investment?

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