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Exhibit 7A.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( 2) 2 - r1.2 E( 1) E( 2) ] -[E( 1) 2 + E( 2) 2 - 2 r1.2E( 1) E( 2) ]
-Refer to Exhibit 7A.1. Show the minimum portfolio variance for a two stock portfolio when r1.2 = 1.
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