Which statements are true of the optimal risky two-asset portfolio? Define the variables as in the text. Recall that E(rd) is the expected excess return of D and E(rd) is its expected return.
a) The optimal risky portfolio is the one with the highest variance.
b) The optimal risky portfolio is the one with the lowest variance.
c) The optimal risky portfolio is independent of the correlation between the two assets.
d) The optimal risky portfolio lies on the Capital Market Line.