Question: You are in a world where there are two assets: gold and stocks. You are interested in investing your money in one or both of

You are in a world where there are two assets: gold and stocks. You are interested in investing your money in one or both of these assets. You collect the following data on the returns of these two assets over the past six years:

Gold Stock Market

Average Return 10% 18%

Standard Deviation 30% 22%

Your estimate of the correlation between gold and stocks is negative -0.40.

What is the average return and standard deviation of the portfolio composed of gold and stocks that has the lowest possible risk?

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