How will this affect the construction of portfolios

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Reference no: EM131933994

You plan to invest in Stock X, Stock Y, or some combination of the two. The expected return for X is 10% and σx= 5%. The expected return for Y is 12% and σy = 6%. The correlation coefficient, ρxy, is 0.75.

Let an indifference curve be tangent to the efficient set at the point where rp=11%. Suppose we add a riskless asset to the investment possibilities. How will this affect the construction of portfolios?

Reference no: EM131933994

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