Florida Company (FC) and Minnesota Company (MC) are both service companies. Their stock returns for the past three years were as follows: FC: -5 percent, 15 percent, 20 percent; MC: 8 percent, 8 percent, 20 percent

a. Calculate the correlation coefficient between the returns of FC and MC

b. What is the variance of a portfolio with 50 percent of the funds invested in FC and 50 percent in MC?

Answers:

A) +0.655

B) 57.17