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That shows me then for any value of x1,
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I can compute what r is and what σ2 is
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and I can then describe the opportunities I have
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from investing that depend on these.
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Now, one thing to do is to solve the equation for r and x1
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and I can then recast the variance in terms of r ;
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that gives us the variance of the portfolio
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as a function of the expected return of the portfolio.
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Let me just solve this for--let's solve x1 for r.
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I've got--this should be x1--did I make a mistake there--
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so it says that r - r2 = x1 (r1 - r2),
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so x1 = (r - r2)/(r1 - r2)