Parts D,E, & F only

As part of an investment team at a large Canadian investment company, you are analyzing the returns of two stocks: ACE and DBD. You consider five possible scenarios for the stocks' returns depending on how good the economy will be over the coming year. ACE has a 0.9 correlation with the market portfolio. DBD has a -0.5 correlation with the market portfolio. The market portfolio has a standard deviation of 10%. The risk free rate is equal to 4%. a) Calculate the expected returns for each stock. b) Calculate the standard deviation for each stock. c) Calculate teh correlation between the two stocks. d) Assume you have a portfolio with $4,000 invested in ACE and $16,000 invested in DBD. Calculate the expected return and standard deviation of returns for this portfolio. How well does diversification work in this case? Comment on why or why not diversification works. e) Calculate the beta of each stock? f) What is the beta of your portfolio in (e)