Exhibit 7B.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by: W 1 = [E($\sigma$ 1 ) 2 - r 1.2 E($\sigma$ 1 ) E($\sigma$ 2 )] - [E($\sigma$ 1 ) 2 + E($\sigma$ 2 ) 2 - 2 r 1.2 E($\sigma$ 1 ) E($\sigma$ 2 )] -Refer to Exhibit 7B.1. Show the minimum portfolio variance for a portfolio of two risky assets when r_1.2 = -1. A)E($\sigma$₁) /[E($\sigma$₁) + E($\sigma$₂)] B)E($\sigma$₁) / [E($\sigma$₁) - E($\sigma$₂)] C)E($\sigma$₂) -[E($\sigma$₁) + E($\sigma$₂)] D)E($\sigma$₂) /[E($\sigma$₁)- E($\sigma$₂)] E)None of the above

Question

Quizplus · Accepted Answer

The Answer is C

Exhibit 7B σ\sigmaσ 1)2 - R1 σ\sigmaσ 1) E σ\sigmaσ 2)] - [E σ\sigmaσ

Exhibit 7B $\sigma$ ₁)² - R_{1 $\sigma$ ₁) E $\sigma$ ₂)] - [E $\sigma$}