Consider two perfectly negatively correlated risky securities K and L. K has an expected rate of return of 13% and a standard deviation of 19%. L has an expected rate of return of 10% and a standard deviation of 16%.
(a) If you invest 25% of your money in K and 75% in L, what would be your portfolio's expected rate of return and standard deviation?
(b) What are the weights of K and L in the global minimum variance portfolio?
(c) What must the risk-free rate be in this economy with risky securities K and L?