4. Anglo-American Equity Fund. An investor is eval- uating a two-asset portfolio of the following two securities:

a. If the two equity funds have a correlation of +.72, what is the expected risk and return for the following three portfolio weightings?

b. Which of the portfolios is preferable? On what basis? Lancaster Technology (London Stock Exchange). Lancaster Technology is an information technology ser- vices provider. Currently it operates primarily within the European marketplace, and therefore is not active or traded on any North American Stock Exchange. The com- pany's share price and dividend distributions have been as follows in recent years:

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Security Expected Return (percent) Std. Dev. (percent) Anglo Equities 125 26.4 American Equities 10.8 22.5