(10 marks) There are four shares (A, B, C, D) with specified stan- dard deviation σ and expected mean return μ. The (σ,μ) values for each share are as follows: (6,3) for A; (6,4) for B; (8,4) for C; and (8,4.2) for D. There is also a risk free investment asset R with (σ, μ) = (0, 3.5).
a. (5 marks) Rank the four portfolios in terms of objective risk-return mea- sures (i.e., irrespective of preferences), and state the reasons for the order you have chosen.
b. (5 marks) You are allowed to form a portfolio by holding weight w of portfolio B and (1 − w) of the risk free asset R. The weight w can be negative.
Find a value of w so your portfolio is objectively superior to portfolio D. Find the risk-return values (σ, μ) of your portfolio.