P5.8 Assume you wish to evaluate the risk and return behaviours associated with various combinations of assets V and W under three assumed degrees of correlation: perfect positive, uncorrelated and perfect negative. The following average return and risk values were calculated for these assets.

2LG 1LG 2LG 1LG rp, r,

a. If the returns of assets V and W are perfectly positively correlated (correlation coefficient ), 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 ), describe the approximate range of (1) return and (2) risk associated with all possible portfolio combinations?