Question 4 (20 Marks) You have combined two stocks, ABC and DEF, into an equally weighted portfolio (Stable) and it has a variance of 35%. The covariance between ABC and DEF is 25%. ABC is a resource stock and has a variance twice that of DEF. You have formed another portfolio (Growth) that has an expected return of 17% and a variance of 50%. The expected return on the market is 15% and the risk free rate is 7% Covariance (, Market) Market is 15%. = 22% and Covariance (DEF,Market) 15.5% and the variance of the Required: a) What is the variance of ABC and DEF? (5 marks) b) What is the correlation of ABC with DEF? (5 marks) c) Is your Stable portfolio efficient? Explain (5 marks) d) What are the main characteristics of an efficient portfolio