Statement of a problem № m41243


Consider the investor in Example 4.2.3 on page 220. Suppose that the returns R1 and R2 on the two stocks have correlation −1. A portfolio will consist of s1 shares of the first stock and s2 shares of the second stock where s1, s2 ≥ 0. Find a portfolio such that the total cost of the portfolio is $6000 and the variance of the return is 0.Why is this situation unrealistic?

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