6. Consider the following information for Stocks 1 and 2: Expected Standard Stock Return Deviation 1 20% 40% 2 12% 20% NE a. The correlation between the returns of these two stocks is 0.3. How will you divide your money between Stocks 1 and 2 if your aim is to achieve a portfolio with an expected return of 18% p.a.? That is, what are the weights assigned to each stock? Also take note of the risk (i.e., standard deviation) of this portfolio. Now assume that, in addition to the two risky stocks, there is a risk-free investment with a guaranteed return of 5% p.a. This gives you the opportunity to use the risk-free asset in your portfolio. b. You create a portfolio with 79.65% of your funds invested in Stock 1 and 20.35% invested in the risk- free asset. Calculate the expected return and standard deviation of this portfolio. How does the portfolio in (b) compare to the portfolio in (a)? Which portfolio do you prefer? Why? C