Suppose your investment portfolio consists of two risky assets. The returns of the first asset and its variance are denoted by r and o, respectively. Similarly, the returns of the second asset and its variance are denoted by rg and Og?, respectively. Let w, and wg be the weights placed on the first and second assets, respectively. Also, the correlation coefficient is written as p, so that Cov(ra, rb) = po A OB. a. Write down the variance of your portfolio, and then find the expressions of weights W and wpfor which the perfect hedge can be achieved when p =-1. (6 Marks) b. Assume that the Sharpe ratio of the portfolio is given by 0.46. Now consider the situation where a risk free asset with rate 1% is included in your portfolio. If you require the new portfolio to yield an expected return of 5.6%, what would be its variance? (4 Marks) Suppose your investment portfolio consists of two risky assets. The returns of the first asset and its variance are denoted by r and o, respectively. Similarly, the returns of the second asset and its variance are denoted by rg and Og?, respectively. Let w, and wg be the weights placed on the first and second assets, respectively. Also, the correlation coefficient is written as p, so that Cov(ra, rb) = po A OB. a. Write down the variance of your portfolio, and then find the expressions of weights W and wpfor which the perfect hedge can be achieved when p =-1. (6 Marks) b. Assume that the Sharpe ratio of the portfolio is given by 0.46. Now consider the situation where a risk free asset with rate 1% is included in your portfolio. If you require the new portfolio to yield an expected return of 5.6%, what would be its variance? (4 Marks)