Suppose the market index has a standard deviation of 0.40 and the riskless rate is 5%. You are given the following information about two stocks X and Y:

= [10% 20%], (,) = 0.096 , (,) = 0.240.

Suppose firm-specific errors are independent and identically distributed with a mean of zero and standard deviation of 0.5.

a) What are the standard deviations of stocks X and Y?

b)_You were to construct a portfolio with the following proportions: 20% in Stock X, 50% in Stock Y, and 30% in T-bills. Find the expected return, beta, standard deviation, and non systematic standard deviation of the portfolio