a. What are the expected changes in the standard deviation for a portfolio of between four and 10 stocks, between 10 to 20 stocks, and between 100 to 200 stocks? (6 marks)

b. Draw a graph of the Markowitz efficient frontier, label the X-axis and Y-axis and three dominant portfolios on your graph. Explain the concept of dominate portfolios, e.g., why they dominate other portfolios in term of risk and return trade off? (4 marks)

c. Stock A, B and C each has the same expected returns and standard deviation. The correlation coefficients are:

A and B correlation = 0.5

B and C correlation = 0

A and C correlation = -0.5

Given these correlations, a portfolio constructed of which pair of stocks will have the lowest standard deviation? Explain. (3 marks)