Security	Number of Shares in portfolio	Price per Share	Expected return on security
A	50	$12	5%
B	30	$10	18%
C	20	$15	20%
Correlation (RA,RB) = .50
Correlation (RA,RC) = .30
Correlation (RB,RC) = -.50

Assume that the standard deviation of security A is 3% and that the standard deviation of security B is 7%. The correlation coefficient between A and B is 0.5. The expected return from security A is 10% and that of security B is 15%.

a) What is the expected return of a portfolio composed of 50% security A and 50% security B?

b) What is the standard deviation of the return on the portfolio, given the portfolios asset allocation in part a)?

c) What happens to the portfolios return and risk if the correlation coefficient of the two assets return is 1? Is this good or bad for an investment? Explain.