12. Gabrielle Troy has invested 25% of her money in Stanford Corp. and the remainder in Berkeley Inc. stock. Gabrielle assesses their prospects as follows:

Stanford Corp. Berkeley Inc.

Expected Return (%) 10 14

Standard Deviation (%) 17 28

Correlation between Returns -0.33

a. What is the expected return of this portfolio?

b. What is the standard deviation of this portfolio?

c. Explain how the portfolio standard deviation would change (if at all) if the correlation between returns was 1.0 (rather than -0.33). No calculations are necessary here, only to the extent that they support your explanation.