Saamwerk Investment Bank has a portfolio of three loans totaling R$20$ million. The following information regarding the loans in the portfolio is provided: $-$

Loan A

Weight $35$

Expected return $11\%$

standard deviation $10\%$

Loan B

Weight $25$

Expected return $8\%$

standard deviation$13\%$

C

Weight $40$

Expected return $12\%$

standard deviation $15\%$

It is determined that the covariance between A and B loans is $3\%,$ while the covariance between A and C loans is $2\%$ and the covariance between B and C loans is $4\%.$

$1.$

Determine the expected return and standard deviation of the portfolio. $(9)$

$2.$

How significant is correlation to credit portfolio risk management? $(1)$