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PART 1 Assume you have a two risky asset world and the assets have a...

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Finance

PART 1 Assume you have a two risky asset world and the assets have a correlation of 1. Asset A has an expected return of 10% and a standard deviation of 10%. Asset B has an expected return of 20% and a standard deviation of 20%. On a graph with expected return on the y-axis and standard deviation on the x-axis, show the portfolio opportunity set from combining the two assets into a portfolio.

PART 2

Combine 50% of Asset A with 50% of Asset B and call it Portfolio C. What is the expected return and standard deviation of portfolio C? Answer the expected return in the first blank and the standard deviation in the second blank. Use a percentage sign and round to the nearest whole percent, e.g., 20%.

Part 3

Assume you combine 50% of Portfolio C in the previous question with 50% of the riskfree asset paying 5%. Show that portfolio on a graph and label it Portfolio D.

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