The securities of companies Z and Y have the following expected returns and standard deviations:

Company ZCompany Y

Expected Return (%)1535

Standard Deviation (%)2040

Assume that the correlation between the returns of the two securities is 0.25.

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

(1) 100%Z

(2) 75%Z + 25%Y

(3) 50%Z + 50%Y

(4) 25%X + 75%Y

(5) 100%Y

(b)Graph your results.

(c)Which of the portfolios in part (a) is optimal? Explain.