The expected returns and standard deviation of returns for two securities are as follows:

Security Z Security Y

Expected Return 15% 35%

Standard Deviation 20% 40%

The correlation between the returns is + .25.

(a) Calculate the expected return and standard deviation for the following portfolios:

1i. all in Z

ii. .75 in Z and .25 in Y

iii. .5 in Z and .5 in Y

iv. .25 in Z and .75 in Y

v. all in Y

(b) Draw the mean-standard deviation frontier.

(c) Which portfolios might be held by an investor who likes high mean and low

standard deviation?