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1. Julie and David Homemaker have two investment alternatives. The investment alternatives are: Investment X Investment Y Expected Rate of Return 0.07 0.12 Standard Deviation

1. Julie and David Homemaker have two investment alternatives. The investment alternatives are:

	Investment X	Investment Y
Expected Rate of Return	0.07	0.12
Standard Deviation	0.04	0.10

Correlation coefficient between A and B is 0.30.

a. Find the expected value, standard deviation, and variance of the portfolio if Julie and David invest 70% in investment X, and 30% in investment Y. How do the results compare to A? Why are they different?

b. Suppose the correlation coefficient decreases to -0.30. What are the impacts of portfolio risks in A and B?

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