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4. You hold a portfolio A consisting of the stocks Rubber Duck and Peppapig. You observe the following information: Expected Return Volatility Correlation Rubber Duck

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4. You hold a portfolio A consisting of the stocks Rubber Duck and Peppapig. You observe the following information: Expected Return Volatility Correlation Rubber Duck 8% 18% Peppapig 6% 12% 0.65 You have invested 70% of your funds in RubberDuck and 30% in Peppapig. The risk-free rate is 1%. Required: a) Compute the expected return of this portfolio! b) Compute the expected volatility of this portfolio! c) Another portfolio B consisting of 90% of Rubber Duck and 10% of Peppa Pig would result in an expected return of 7.8% and a portfolio volatility of 17%. Compute which of the two portfolios should be recommended given their reward-risk relationship

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