Question $1$:

Consider the following scenarios for the one year return on a Stock Fund and on a Bond Fund.

a$)$ Calculate the expected return and the standard deviation of returns of the Stock Fund and

of the Bond Fund.

b$)$ Calculate the correlation coefficient between the Stock and the Bond Fund.

c$)$ Consider a portfolio that has $50\%$ in the Stock Fund and $50\%$ in the Bond Fund. What is

the return of this portfolio in each of the three scenarios?

d$)$ Calculate the expected return and the standard deviation of returns for a portfolio with the

$50\%$ in the Stock Fund and $50\%$ in the Bond Fund.

d$\mathrm{.}1)$ Using the answers to items a$)$ and b$)$

d$\mathrm{.}2)$ Using the answer to item c$)$