Hi, It is given that FA(a)=FB(a)=0. However, above lines says that "a" is the lowest return respectively. Therefore, I feel it is not necessary that both FA(a)=FB(a)=0 as at least any one of portfolio is having "a" return and therefore it is written it is lowest return portfolio can provide. This can be noticed from few previous pages questions/example. Please guide. Regards, Ashok
Hi Ashok, All we're saying here is that "a" is the lowest possible return that either of Assets A or B can provide. So, by definition, the probability that A provides a return of less than "a" is zero and hence FA(a) = 0. Likewise, the probability that B provides a return of less than "a" is zero and hence FB(a) = 0. Note that here we are implicitly assuming that Assets A and B both have continuous distributions of investment returns.
