a). Risk-free portfolio have 0 portfolio's variance.
portfolio variance = [(wA^2*sdA^2) + (wB^2*sdB^2) + (2*wA*wB*p*sdA*sdB)]
Here p=-1 and implies wAsdA=wBsdB
Let wb be (1-wA)
0.40*wA = 0.60*(1-wA)
0.40*wA = 0.60 - (0.60*wA)
(0.40*wA) + (0.60*wA) = 0.60
wA = 0.60, or 60%
wB = 1 - wA = 1 - 0.60 = 0.40, or 40%
E(R) = [wA * rA] + [wB * rB]
= [0.60 * 8%] + [0.40 * 11%] = 4.80% + 4.40% = 9.20%
b). No, as the stocks are perfectly negatively correlated their return has to be same as risk free rate which is 9.20%
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