Calculate the portfolio weights that remove all risk if, Financial Management

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Calculate the portfolio weights that remove all risk if

Suppose Intel’s stock has an expected return of 20% and a volatility of 25%, while Coca-Cola’s has an expected return of 10% and volatility (i.e. standard de-viation) of 10%. If these two stocks were perfectly negatively correlated (i.e. their correlation coefficient is -1),

i. Calculate the portfolio weights that remove all risk.

ii. If there are no arbitrage opportunities, what is the risk-free rate of interest in this economy?

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Financial Management: Calculate the portfolio weights that remove all risk if

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