a) Consider investing money into two stocks. Suppose they have expected returns next year of 10% and 20%, respectively. Assume further that they have standard deviations of 15% and 25%, with a correlation of 50%.

i. What is the expected return on the equal-weighted portfolio?

ii. How do you get a portfolio with 18% expected return and what is the risk of this portfolio?

iii. Suppose the two stocks have realized returns of 30% and -10% next year. What is the realized return of the equal-weighted portfolio, and what would the value of your wealth be if you invested $100 in the portfolio?