Variances of the two stocks-cartman inc

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Suppose you consider investing in Cartman, Inc. and Garrison Enterprises. The correlation between the two stocks is 0.5 and the risk-free rate is 2%. Cartman's expected return is 12% and its standard deviation is 20%. Garrison's expected return is 17% and its standard deviation is 30%.

a. What are the variances of the two stocks and what is the covariance?

b. How much weight you should invest in each of these two stocks so that your portfolio is a minimum variance portfolio?

c. How much weight you should invest in each of these two stocks so that your portfolio is a tangency portfolio?

Reference no: EM132687014

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