2. Use the Excel file Data for Two Stocks to determine the following:

a.Create a one-way data table using EXCELs Data Table feature that determines the different means and standard deviations for portfolios consisting of combinations of Stock A and Stock B by varying the correlation coefficient value between Stock A and Stock B through the full range of possible correlation coefficient values. Use increments of 0.1 for the possible correlation coefficient values.

b. Graph the means and the standard deviations of the portfolios from the one-way data table. Be sure to include a title for the graph and label the axes.

c.Explain how the portfolio means are affected by changing the correlation coefficient values.

d. Explain how the portfolio standard deviations are affected by changing the correlation coefficient values.

e. Explain the impact on portfolio diversification of changing the correlation coefficient values only.

A B B D Data for Two Stocks Expected return Variance of return Standard deviation of return Correlation A 8.00% 0.40 63.25% 0.6 B 20.00% 0.75 86.60% Proportion of A 0.7