Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 60% of the dollar value of the portfolio, and stock M will account for the other 40%. The historical returns over the next 6 years, 2013-2018, for each of these stocks are shown in the following table: a. Calculate the actual portfolio return, r, for each of the 6 years. b. Calculate the expected value of portfolio returns, rp, over the 6-year period. - X c. Calculate the standard deviation of expected portfolio returns, or over the 6-year period. Data table 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. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Expected return Stock L Year 2013 HIER 14% 2014 15% 2015 17% 2016 19% 2017 21% 2018 22% a. The actual portfolio return for year 2013 is %. (Round to two decimal places.) The actual portfolio return for year 2014 is%. (Round to two decimal places.) The actual portfolio return for year 2015 is%. (Round to two decimal places.) The actual portfolio return for year 2016 is%. (Round to two decimal places.) The actual portfolio return for year 2017 is %. (Round to two decimal places.) The actual portfolio return for year 2018 is %. (Round to two decimal places.) b. The expected value of portfolio returns, rp, over the 6-year period is%. (Round to two decimal places.) c. The standard deviation of expected portfolio returns, over the 6-year period is %. (Round to two decimal places.) Print Stock M 21% 19% 17% 15% 13% 11% Done d. How would you characterize the correlation of returns of the two stocks L and M? (Select the best answer below.) O A. The assets are negatively correlated. O B. The assets are positively correlated. e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. (Select the best answer below.) O A. Combining these two positively correlated assets increases overall portfolio risk. O B. Combining these two negatively correlated assets increases overall portfolio risk. O C. Combining these two negatively correlated assets reduces overall portfolio risk. O D. Combining these two positively correlated assets reduces overall portfolio risk