An investor has decided to form a portfolio by putting 35% of his money into Coca Cola stock and 65% into Disney stock. The investor assumes that the expected returns will be 8% and 9%, respectively, and that the standard deviations will be 10% and 20%, respectively.

a Find the expected return on the portfolio.

b Compute the standard deviation of the returns on the portfolio assuming that

(i) the two stocks returns are perfectly positively correlated

(ii) the coefficient of correlation is .3

(iii) The coefficient of the correlation is .5

(iv) the two stocks returns are uncorrelated