Problem $7$:

An investor is given the following information about the returns on two stocks.

$\backslash$table$[[,$Stock$],[,1,2],[$Mean$,0\mathrm{.}09,0\mathrm{.}13],[$Standard deviation,$0\mathrm{.}15,0\mathrm{.}21]]$

a$)$ If she is most interested in maximizing her returns which stock should she choose?

b$)$ If she is most interested in minimizing her risk, which stock should she choose?

c$)$ Computed the expected value and variance of the portfolio composed of $60\%$ stock $1$ and $40\%$ stock $2.$ The coefficient of correlation is $0\mathrm{.}40.$

d$)$ Describe what happens to the expected value and standard deviation of the portfolio return when the coefficient of correlation decreases.