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22. given       (r1,2)          -100      E(s1)              5%       

22. given

      (r1,2)          -100

     E(s1)              5%

       E(s2)            6%

The weight of security 2 to give the minimum portfolio variance?

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Answer #1

We can calculate the weight of minimum variance portfolio (MVP) with following formula.

where,

w1 = weight of stock 1

and

w2 = 1-w1

putting the values:

Thus,

Thus, the weight of Stock-2 in above minimum variance portfolio is 0.45

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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