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

question 77

Multiple Choice

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( $\sigma$ ₂) ² - r_1.2 E( $\sigma$ ₁) E( $\sigma$ ₂) ] -[E( $\sigma$ ₁) ² + E( $\sigma$ ₂) ² - 2 r_1.2E( $\sigma$ ₁) E( $\sigma$ ₂) ]
-Refer to Exhibit 7A.1. Show the minimum portfolio variance for a two stock portfolio when r_1.2 = 1.

• A)E(\(\sigma\)₂) -[E(\(\sigma\)₁) -E(\(\sigma\)₂)]
• B)E(\(\sigma\)₂) -[E(\(\sigma\)₁) + E(\(\sigma\)₂)]
• C)E(\(\sigma\)₁) - [E(\(\sigma\)₁) -E(\(\sigma\)₂)]
• D)E(\(\sigma\)₁) /[E(\(\sigma\)₁) + E(\(\sigma\)₂)]
• E)None of the above

---

Definitions:

Good Faith

An intention to act with honesty, fairness, and integrity in dealings, without seeking to deceive or defraud.

Manifest Agreement

Manifest Agreement refers to a clearly expressed or demonstrated mutual understanding or contract between parties, often requiring no further evidence to prove its existence.

Written Word

Information or content that is expressed in written form, as opposed to spoken word or other modes of communication.

Advertised Reward

An offer of payment published to the general public for the performance of a specific task, such as information leading to the recovery of lost property.