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business school. Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the
business school. Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the common stock of Firm A and Firm B: a. If Mary invests half her money in each of the two common stocks, what is the portfolio's expected rate of return and standard deviation in portfolio return? b. Answer part a where the correlation between the two common stock investments is equal to zero. c. Answer part a where the correlation between the two common stock investments is equal to +1. d. Answer part a where the correlation between the two common stock investments is equal to 1. e. Using your responses to questions a-d, describe the relationship between the correlation and the risk and return of the portfolio. \begin{tabular}{lcc} \hline Firm A's common stock & Expected Return & Standard Deviation \\ Firm B's common stock & 0.13 & 0.16 \\ Correlation coefficient & 0.19 & 0.21 \\ \hline \end{tabular}
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