(Investments and Fund. Analysis)

3) Now suppose that the investor wants only to buy A (whose expected return and variance is given in Q1) but also wants to invest 40% of his/her money in a risk-free T-Bill whose return is 12%. The correlation coefficient between a T-Bill and stock A is +0.2. Given this find the portfolio expected return and portfolio variance.

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1) There are two stocks which an investor wants to buy. The stock has an expected return of 25% and an expected variance of 16% while stock B has an expected return of 15% and expected variance of 9%. Find the portfolio return and portfolio variance assuming that the correlation coefficient between A and B is + 0.4 and assuming that investor invests 60% of his/her money in stock A.