MC Questions 2&3

4.2 Question 2 The variance of returns is 0.07 for Stock A and 0.04 for Stock B. The covariance between the returns of A and B is 0.004. The correlation of returns between A and B is approximately: A 0.076 B 0.112 C 0.143 4.3 Question 3 A proper portfolio was created by investing 30% (or a weight of 0.3) of the funds in Asset A (standard deviation = 20%) and the balance of the funds in Asset B (standard deviation = 12%). If the correlation coefficient is 0.8, what is the portfolio standard deviation? A 10.6% B 12.4% C 13.7% What would the answer be if the correlation was -0.8 A 2.8% B 1.2% C 5.0%