3. (a) Using the following information calculate the portfolio (p/f) return and risk of a portfolio consisting of two assets: Stock Expected Standard P/f weight return deviation (std) Toronto stock index (STX) 4% 3.5% 0.60 U.S. stock index (S&P 5% 2% 0.40 500) Correlation (STX, S&P500) 0.25 (b) Recalculate the portfolio expected return and risk by (i) changing the correlation to -0.25 and (ii) changing the weight to 0.40 for STX and 0.60 for S&P500 and comment on the differences in the results of (a) and (b). (20 points) Note: The covariance of two stocks A and B (cov (A, B) is equal to correlation coefficient (A, B) *std of A*std of B. Tani