Assume that you have two investment opportunities to choose from, bond B and stock S. They have the following expected returns and variance for the next year: E(B) = 0.04 = 4%, Var(rs) = of = 0.0036, Ers) = 0.10 = 10% Var(rs) = o = 0.0100.- e The correlation between the returns of the bond and the stock is Corr(rk, rs) = 0.20. Warm up. a) Calculate the standard deviation of bond returns and stock returns. b) Assuming a risk-free rate of rf = 0.02 = 2%, find the Sharpe ratio of each investment. +