4. For p1,2 = 1 we have R2 = aR1 + b for a> 0. If the risk is 0 then compute the expected return. 5. Under the assumption that CJ1 ~ CJ2 and p1,2                          CJ1 ( CJ1 - P1,2CJ2) 1 Smin...

4. For p1,2 = 1 we have R2 =
aR1
+
b
for
a>
0. If the risk is 0 then

compute the expected return.

5. Under the assumption that CJ1 ~ CJ2 and p1,2 <>

                         CJ1 ( CJ1 - P1,2CJ2) 1

Smin = 2 2

                                  (J
1 +
(J
2 - 2p1,2CJ1 CI2

6. If E is the error in the best linear predictor of an asset
ai
with respect

to the market portfolio, show that
Cov(RM,
E) = 0.