Using the formulas for the expected return and the standard deviation of two-stock portfolio, complete the following table for the three cases that securities A and B are: (i) perfectly positively correlated, (ii) uncorrelated and (iii) perfectly negatively correlated.

Assume that E(rA) = 20%, A= 20%, E(rB) = 40%, B= 30%.

wA wB E(rP) p(= 1) p(= 0) p(=1)

100% 0%

90% 10%

80% 20%

70% 30%

60% 40%

50% 50%

40% 60%

30% 70%

20% 80%

10% 90%

0% 100%