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    Millennium Investments (MI), an investment advisory firm, relies on mean-variance analysis to advise its clients. Mi's advisors make asset allocation recommendations by selecting the mix of assets along the capital allocation line that is most appropriate for each client.
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    Statement 2: Because I am highly risk-averse, I expect that my investment portfolio on the capital allocation line will have risk and return equal to that of the global minimum variance portfolio.
    MI operates under the assumption that all investors agree on the forecasts of asset expected returns, variances, and correlations. Based on these assumptions, MI created the Millennium Investments 5000 Fund (MI-5000), which is a market value-weighted portfolio of all assets in the market. MI derives the forecasts for the MI-5000 Fund and for a fund comprising short-term government securities shown in Exhibit 2.

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    Answer: A
    Explanation:
    Explanation/Reference:
    Explanation:
    The highest returns for each level of risk are provided along the capital market line:

    The appropriate weighring can be determined by recalling the formula for the standard deviation of an investment that combines a risky asset (i.e., the MI-5000) and a risk-free a

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