Muhammad invests one-fourth in Ford and remainder in Procter and Gamble. The expected return from Ford and Procter and Gamble is 12% and 15%, respectively. While the standard deviation from Ford and Procter and Gamble is 7% and 9%, respectively.

a. Calculate the expected return of a portfolio and portfolio risk if correlation between the two stocks is 0.5.

b. If Muhammd adds more stocks from different sectors in his portfolio, what will happen (increase, decrease, remain samo) to portfolio risk?

Briefly justify your answer.