Exhibit 7A -Refer to Exhibit 7A

question 1

Multiple Choice

Exhibit 7A.1
$$\mathrm { W } _ { 1 } = \left[ \mathrm { E } \left( \sigma _ { 2 } \right) ^ { 2 } - r _ { 1.2 } \mathrm { E } \left( \sigma _ { 1 } \right) \mathrm { E } \left( \sigma _ { 2 } \right) \right] \div \left[ \mathrm { E } \left( \sigma _ { 1 } \right) ^ { 2 } + \mathrm { E } \left( \sigma _ { 2 } \right) ^ { 2 } - 2 r _ { 1.2 } \mathrm { E } \left( \sigma _ { 1 } \right) \mathrm { E } \left( \sigma _ { 2 } \right) \right]$$
-Refer to Exhibit 7A.1.Show the minimum portfolio variance for a two stock portfolio when r_1.2 = 1.

• A) E(?₂) ¸ [E(?₁) - E(?₂)]
• B) E(?₂) ¸ [E(?₁) + E(?₂)]
• C) E(?₁) ¸ [E(?₁) - E(?₂)]
• D) E(?₁) ¸ [E(?₁) + E(?₂)]
• E) None of the above

---

Definitions:

Aggregate Demand Curve

A curve that represents the total quantity of all goods and services demanded by the economy at different price levels.

Equilibrium Output

The level of output where the aggregate supply is equal to the aggregate demand in an economy.

Price Level

A measure that reflects the average prices of goods and services in an economy at a given time, often compared to a base year to track inflation.

Beneficial Supply Shock

A situation in which supply increases unexpectedly, leading to lower prices and potentially higher consumer satisfaction without causing negative economic effects.