0. Stock A has an expected return of 8 percent and an 18 percent volatility. Stock B has an expected return of 16 percent and a 30 percent volatility. The correlation coef- ficient between the returns of stock A and stock B is 0.30.

   1. What is the expected return of portfolio P1 with 25 percent of funds in stock A and the balance in stock B?

   2. What is the covariance between the returns of stock A and those of stock B?

   3. What is the volatility of the portfolio P1?

   4. What are the expected return and volatility of the minimum-risk portfolio?

   5. Portfolio P2 has an expected return of 14 percent and a 25 percent volatility. Is

      it an efficient portfolio? Explain. What expected return should portfolio P2 offer to be efficient?