Consider two investments A & B each having the following characteristics:

Pi Expected Return A Expected Return B

0.4 12 -9

0.2 8 7

0.4 -5 11

Assume that the investor combined A and B in various proportions as follows;

A (%) B (%)

100 0

75 25

50 50

25 75

0 100

Required:

1. Determine the covariance and coefficient of correlation
2. Compute the portfolio return and risk of the assets.