Question # 3 (8 marks) A portfolio consists of two stocks:

Stock Expected Standard Beta Weight Return Deviation

X 8.85% 5.9% 1.2x 30% Y 10.3% 5.75% 1.8x 70%

The correlation between the two stocks returns is 0.40.

Required: (a) (5 marks) Calculate the expected return, standard deviation, and Beta of the portfolio

(b) (3 marks) Given that the risk free rate is 2% and the expected market rate is 9%, would you invest in this portfolio? Why?