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a) The formula for minimum risk weights in a two stock portfolio is
So, WS = (0.232 -0.23*0.32 *0.15) / ( 0.322+0.232 -2*0.23*0.32 *0.15)
= 0.3142 = 31.42%
and WB = 1- WS = 1-0.3142 =0.6858=68.58%
So, portfolio weight for stock fund is 0.31
b) The standard deviation of a portfolio is given by
=sqrt (0.3142^2*0.32^2+0.6858^2*0.23^2+2 *0.23*0.32*0.3142*0.6858*0.14)
= sqrt (0.03943)
=0.198569
=19.86%
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