Security A has a mean return of 7.9%, Asset B has a mean return of 4.95%,

Security C has a mean return of 10.3%.

The variance/covariance matrix for the three assets is provided:

16 11 4

11 10 1.5

4 1.5 18

wherei,j= Corr(Ri, Rj)

a) Find the correlation matrix for the three assets using the given variance/covariance matrix. Show your work.

b) According to Modern Portfolio Theory, which two securities would you put into a portfolio and why?