You are a mean-variance optimizer with A = 5. There are two risky assets and one risk-free asset. E[ra] = 0.08, E[rB] = 0.06, Var[ra] = 0.05, Var[rB] = 0.06, and r f = 0.03. 1.I) Assume corr(rA, rB) = 0.75. Compute the optimal portfolio. 1.II) Assume corr(rA, rB) = 0.0. Compute the optimal portfolio. 1.III) Assume corr(rA, rB) = 0.75. Compute the optimal portfolio. 1.IV) Discuss the results, explaining how the correlation impacts the optimal choice of each asset (including the risk-free)

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Answer To compute the optimal portfolio I With a correlation of 075 Weights wA 06 wB 04 Expect... View the full answer