Question 6. (15 points)A portfolio consists of Stock Aand Stock B.Data for the 2 stocks is shown below.

Stock A: expected return

12% Stock A: standard deviation

40% Stock B: expected return

14% Stock B: standard deviation

60% Correlation between A and B

0.35 Stock A beta

0.90 Stock B beta

1.20

% portfolio in Stock A

45% % portfolio in Stock B

55% Stock A: expected return

12% Stock A: standard deviation

40% Stock B: expected return

14% Stock B: standard deviation

60% Correlation between A and B

0.35 Stock A beta

0.90 Stock B beta

1.20

% portfolio in Stock A

45% % portfolio in Stock B

55%

a.Calculate the expected return of the portfolio.

Portfolio: expected return

b.Calculate the standard deviation of the portfolio.

Portfolio: standard deviation

c.Calculate the beta of the portfolio

d.Does the portfolio have more risk, less risk, or the same risk as the market? Explain.

e.Will your portfolio likely outperform, underperform, or perform the same as the market in a period when stocks are rapidly falling in value?Why?