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In: Finance

You have the following assets available to you to invest in: Asset Expected Return Standard Deviation...

You have the following assets available to you to invest in:

Asset

Expected Return

Standard Deviation

Risky debt

6%

0.25

Equity

10%

.60

Riskless debt

4.5%

0

The coefficient of correlation between the returns on the risky debt and equity is 0.72

2A. Using the Markowitz portfolio optimization method, what would the composition of the optimal risky portfolio of these assets be?

2B. What would the expected return be on this optimal portfolio?

2C. What would the standard deviation of this optimal portfolio be?

Please show work.

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Expert Solution

jeff jeffy answered 1 year ago
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