The table below gives a sample of artificial historical data for an energy company (Stock A) and a phone company (Stock B). Each indicated return rate is end of month to end of month and is based on adjusted closing prices. For example, RA Jan-2012 is the return rate from the last trading day in December 2011 to the last trading day in January 2012. Using the table, express your answers in percentages where appropriate.

1. For a portfolio consisting of stocks A and B, use the data in the table to determine the portfolios expected monthly total return rate and the portfolios monthly risk under selection I, where funds are split evenly between the two stocks, and selection II, where two-thirds of your funds are in stock A and one-third in stock B. Annualize the portfolio expected returns and risks.

2. Would you recommend portfolio selection I or II to an investor? Briefly discuss your answer.

Date Rmonthly Ronthly Jan-2012 2.45% 2.69% Feb-2012 3.35% 1.81% Mar-2012 3.24% 4.94% Apr-2012 2.93% 5.88% May-2012 6.13% 2.51% Jun-2012 6.19% -0.35% Jul-2012 0.78% 1.59% Aug-2012 -0.19% -3.83% Sep-2012 4.65% 5.24% Oct-2012 3.53% 4.85% Nov-2012 5.03% 2.48% Dec-2012 -1.71% 4.03%