Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford Harley Davidson Yearly standard deviation of return (%) 23.5 26.4 Assume the standard deviation of the r eturn on the market was 12.3%.

a. The correlation coefficient of Fords return versus Harley Davidson was 0.40. What is the standard deviation of a portfolio invested half in each share?

b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills?

c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker?

d. What combination of Ford and Harley Davidson offers the minimum risk?