Assume that your portfolio consists of two stocks: Verizon and Walmart and have invested 60% of your money in Verizon, the telecommunication company, and the remaining 40% invested in Walmart, the retail company. The expected returns and standard deviations on the two investments are:

Verizon Walmart

Expected return 5% 10%

Standard deviation 15% 20%

The correlation coefficient between AT&T and Costco is -0.25.

Compute the expected returns of your portfolio. ?

5%

7.5%

7%

8%