Hi, In question 6.7.ii we are asked to calculate the equation of the efficient frontier using the Lagrangian function. The solution finds the partial derivatives, determines equations for x1 and x2 and substitutes this back into the expression for variance of portfolio returns. Do we not also need to find dV/dE as this will give us the part of the curve above the global minimum variance as this would be the equation of the efficient frontier?
Hi Usually, yes, but in this question the risky assets are perfectly correlated and so the efficient frontier is actually a straight line. Hence there is no "upper portion". Thanks
