Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 55% of the dollar value of the portfolio, and stock M will account for the other 45%. The expected returns over the next 6 years, 2013 - 2028, for each of these stocks are shown in the following:

Year Stock L Stock M

2013 14% 24%

2014 16% 23%

2015 16% 22%

2016 18% 21%

2017 18% 20%

2028 20% 19%

a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, rbarp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.