P5.8 Assume you wish to evaluate the risk and return behaviors associated with various combi- nations of assets V and W under three assumed degrees of correlation: perfect positive, uncorre- lated, and perfect negative. The following average return and risk values were calculated for these assets. Asset Average Return, 7 (%) V 8 W 13 Risk (Standard Deviation), s (%) 5 10

a. If the returns of assets V and W are perfectly positively correlated (correlation coeffi- cient =+1), describe the range of (1) return and (2) risk associated with all possible portfolio combinations.

b. If the returns of assets V and W are uncorrelated (correlation coefficient = 0), describe the approximate range of (1) return and (2) risk associated with all possible portfolio combinations.

c. If the returns of assets V and W are perfectly negatively correlated (correlation coeffi- cient = -21), describe the range of (1) return and (2) risk associated with all possible portfolio combinations.