Consider the Markowitz model with n = 2 assets, whose returns are characterized by the pairs A = (mu1; sigma1) and B = (mu2; sigma2 ). We here...

Consider the Markowitz model with n = 2 assets, whose returns are characterized by the pairs A =

(mu1; sigma1) and B = (mu2; sigma2 ). We here consider the case where the correlation is  = - 1.

(a) By using a suitable property of the correlation between random variables, show that there exist

a > 0 and b e R such that mu2  = a*mu1  + b and sigma2 = a*sigma1 .