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  3. 3. (4 marks) suppose there are only 2 risky securi

3. (4 marks) Suppose there are only 2 risky securities in the entire market. The...

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3. (4 marks) Suppose there are only 2 risky securities in the entire market. The expected return on security A is 5% and the expected return on security B is 11%. The market capitalizations of securities A and B are equal. a) (1 mark) What is the expected return on the market portfolio? b) (1 mark) How would you construct an optimal portfolio with an expected return of 2%, assuming there is no risk-free asset. what are the weights on the two risky securities. c) (1 mark) How would you construct an optimal portfolio with an expected return of 5%, assuming there is a risk-free asset returning 2%, what are the weights on the two risky securities. d) (1 mark) Suppose you form a portfolio by making a $25 investment in the risk- free asset and a $75 investment in the market-portfolio. The standard deviation of this portfolio is 0.20. What must be the standard deviation of the market portfolio

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