which one is correct?QUESTION 12Exhibit 6B.1USE 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: W1 = [E(σ1)2 − r1.2 E(σ1) E(σ2)] &χεδιλ; [E(σ1)2 + E(σ2)2 − 2 r1.2 E(σ1) E(σ2)] Refer to Exhibit 6B.1. Show the minimum portfolio variance for a portfolio of two risky assets when r1.2 = − 1. a.E(σ1) &χεδιλ; [E(σ1) − E(σ2)] b.E(σ2) &χεδιλ; [E(σ1) − E(σ2)] c.None of these are correct. d.E(σ1) &χεδιλ; [E(σ1) + E(σ2)] e.E(σ2) &χεδιλ; [E(σ1) + E(σ2)]

W1 = [E(σ1)2 − r1.2 E(σ1) E(σ2)]/[E(σ1)2 + E(σ2)2 − 2 r1.2 E(σ1) E(σ2)] when, r1.2 = -1 W1 = E(σ1)2…

Answered: which one is correct? QUESTION 12…

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section: Chapter Questions

Problem 3DQ

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QUESTION 12

Exhibit 6B.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:

W₁ = [E(σ₁)² − r_1.2 E(σ₁) E(σ₂)] &χεδιλ; [E(σ₁)² + E(σ₂)² − 2 r_1.2 E(σ₁) E(σ₂)]

Refer to Exhibit 6B.1. Show the minimum portfolio variance for a portfolio of two risky assets when r_1.2 = − 1.

	a.	E(σ₁) &χεδιλ; [E(σ₁) − E(σ₂)]
	b.	E(σ₂) &χεδιλ; [E(σ₁) − E(σ₂)]
	c.	None of these are correct.
	d.	E(σ₁) &χεδιλ; [E(σ₁) + E(σ₂)]
	e.	E(σ₂) &χεδιλ; [E(σ₁) + E(σ₂)]

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