Math Problem Statement
(10 points) An amateur investor is looking to invest into the uncorrelated assets (ρ = 0) with the following characteristics: Asset Expected return Standard deviation A 0.02 0.10 B 0.10 0.25 Find the weights of a minimum-variance portfolio that consists of assets A and B, assuming the investor is aiming for a portfolio return of 12%. give me all the calculation complete step by step
Solution
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Math Problem Analysis
Mathematical Concepts
Portfolio Optimization
Linear Algebra
Variance Minimization
Formulas
Portfolio return: Rp = wA * RA + wB * RB
Weight sum constraint: wA + wB = 1
Variance of portfolio: σp^2 = wA^2 * σA^2 + wB^2 * σB^2
Theorems
Minimum Variance Portfolio Theorem
Suitable Grade Level
Undergraduate Finance/Economics
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