Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here:

Asset	Average Return, r		Risk (Standard Deviation), s
Alpha	6.6%		30.4%
Beta	10.9%		49.5%

a. If the returns of assets and Beta are perfectly positively correlated (correlation coefficient = +1), over what range would the average return on portfolios of these stocks vary? In other words, what is the highest and lowest average return that different combinations of these stocks could achieve? What is the minimum and maximum standard deviation that portfolios and Beta could achieve?

b. If the returns of assets and Beta are uncorrelated (correlation coefficient =0 ), over what range would the average return on portfolios of these stocks vary? What is the standard deviation of a portfolio that invests 75% in and 25% in Beta? How does this compare to the standard deviations of and Beta alone?

c. If the returns of assets and Beta are perfectly negatively correlated (correlation coefficient ), over what range would the average return on portfolios of these stocks vary? Calculate the standard deviation of a portfolio that invests 62.5% in and 37.5% in Beta. a. If the returns of assets and Beta are perfectly positively correlated (correlation coefficient ), the range is between 62.5% and 37.5% (Round to one decimal place.)