Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The expected returns over the next 6 years, 20152020,for each of these stocks are shown in the following table:

Expected return
Year	Stock L		Stock M
2015	16%		24%
2016	18%		24%
2017	18%		24%
2018	19%		24%
2019	20%		24%
2020	22%		24%

.

a.Calculate the expected portfolio return,rp, for each of the 6 years.

b. Calculate the expected value of portfolio returns, rp, over the 6-year period.

c.Calculate the standard deviation of expected portfolio returns, rp, 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.

(round all answers to two decimal places)