3. The risk estimates suggest that the two assets have a covariance of 0.002433 and...
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3. The risk estimates suggest that the two assets have a covariance of 0.002433 and correlation less than 1. However, to visualise the effect of diversification you have decided to create hypothetical portfolios of following weights: weights A B Portfolio Variance Expected Return Standard Deviation 0.4 0.6 0.5 0.5 7 0.6 0.4 Calculate and critically evaluate: a. Expected return of the portfolio for each combination. 3 Marks b. Variance and standard deviation for each combination. 7 Marks
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