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Question 2 Consider an investor allocating funds between two assets. The percentage of the total...

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Question 2 Consider an investor allocating funds between two assets. The percentage of the total funds allocated to asset 1 and asset 2 are denoted by weight w, and respectively. Their returns are perfectly negatively correlated and they have the same return variance (? A) If we denote the portfolio return variance by prove that it can be simplified to give: You can form a portfolio of two stocks, A and B, which have expected returns of 15% and 11% respectively. The variance-covariance matrix of the returns of the two stocks is given in the table below. The covariance's of the returns of stock A and stock B with the market return are 0.050 and 0.025 respectively, whereas the market return's variance is 0.036. Stock A Stock B0.025 Stock A 0.04 Stock B 0.025 0.032 B) If you demand an expected return of 12%, what are the portfolio weights? C) What is the portfolio's standard deviation? D) What is the portfolio's beta? E) What is the systematic and unsystematic risk of this portfolio

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