(Computing the standard deviation for a portfolio of two risky investments) Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in 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 are 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 .80 and Mary invest 30% in Firms A and 70% in Firms B.

Firm A common stock Expect return 0.18 Standard deviation 0.16

Firm B common stock Expected return 0.19 standard deviation 0.22

Correlation coefficent expected return 0.40