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Consider again the investment problem that opened the chapter.

a. Suppose the portfolio manager limits the portfolio to treasury bills and treasury bonds. Using a graph, find the proportions of each type of bond that maximize expected return subject to the risk and maturity constraints.

b. Now suppose the manager can invest in any of the five securities but cares only about the risk constraint. Determine the optimal portfolio.

c. Answer part (b), assuming the manager cares only about the maturity constraints.

Microeconomics, Economics

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