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Pepsis mean return over the last 5 years is 19% while McDonalds is 14%. Their respective standard deviations are 21% and 18%. The two stocks

  1. Pepsis mean return over the last 5 years is 19% while McDonalds is 14%. Their respective standard deviations are 21% and 18%. The two stocks correlation coefficient is -.20.

  1. Calculate the portfolio mean return for the minimum variance portfolio.
  2. Calculate the portfolio risk for the minimum variance portfolio.
  3. Discuss the benefits of diversification for Pepsi and McDonalds.

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