= The Bank of Tinytown has two $20,000 loans with the following characteristics: Loan A has an expected return of 10 percent and a standard deviation of returns of 10 percent. The expected return and standard deviation of returns for loan B are 12 percent and 20 percent, respectively. If the correlation between loans A and B is .15, what are the expected return and the standard deviation of this portfolio? What is the standard deviation of the portfolio if the correlation is −.15? What role does the covariance, or correlation, play in the risk reduction attributes of modern portfolio theory?