Problem $2-$ Increasing Correlations

You create a portfolio that invests $40\%$ in stock A with E$($rA$)=15\%,\backslash$sigma A $=10\%$ and $60\%$ in

stock B with E$($rB$)=10\%,\backslash$sigma B $=4\%.$

$1.$ Estimate the expected return of the portfolio.

$2.$ Estimate the standard deviation of the portfolio if the two stocks are uncorrelated.

$3.$ Estimate the standard deviation of the portfolio if the two stocks have correlation $0\mathrm{.}5.$

$4.$ Estimate the standard deviation of the portfolio if the two stocks are perfectly positively

correlated.