Question: this is all the info PROBLEM 4. Suppose that you are managing the only investment rm in a country with only two compa- nies: National

this is all the info

PROBLEM 4. Suppose that you are managing the only investment rm in a country with only two compa- nies: National Auto Co. (NAC) and National Oil Inc. (NOI). From historical data, you make the following estimates for the annualized data: ,uNAC = 9%, {mm = 15%, O'NAC = 5%, O'NOI = 11%, ,ONAC,NOI = 0.1. (Of course, so far we have assumed that all the investors in the country are Mean-Variance investors, 126., they take into account only the rst two moments of the returns.) (a) (10 Points) A client asked you for a portfolio that offers two times the return of the minimum variance portfolio. Find the portfolio weight of each stock in such a portfolio. (b) (10 Points) The effective annual risk free rate is 2%. Which portfolio, built on the two stocks, should you be offering to your clients? Explain your

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