Assume analysts provide the following types of information. Assume short sales are allowed.

Stock	Mean Return	Standard Deviation
A	10%	8%
B	12%	10%
C	18%	16%
risk free rate	5%

The pairwise coefficient of correlation between all three stocks is 0.5, i.e. _AB=_AC=_BC=0.5.

a) What the rate of return and the standard deviation of an equal weighted portfolio consist of all three stocks?

b) What is the minimum variance portfolio of A and B? What is the standard deviation of this portfolio? Explain briefly why the standard deviation of the portfolio is lower than that of A and B.

c) Find the weights of stock A, B and C in the efficient portfolio.