a) Jack Jones has a two-stock portfolio with 30% invested in Stock A. The variance of Stock A is 0.10 and the standard deviation of Stock B is 15%. The covariance between Stock A and Stock B is 0.07 Calculate the standard deviation of the portfolio. (3 Marks) Please provide your answer as a decimal to 6 decimal places.

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b) Calculate the correlation between the two stocks. (4 Marks) Please provide your answer to 6 decimal places.

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c) Mike Menzes has a portfolio made up of 2 different stocks. He decides to increase his portfolio size by $1m of stock C. What is the expected impact of his decision on the variance of his portfolio return? (2 Marks)

Answer: AnswerIncrease in portfolio varianceDecrease in portfolio varianceNo change in portfolio varianceCannot be determined