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Year 2014 2015 2016 2017 2018 Stock A's Returns, PA -18.00% 33.00 15.00 -0.50 27.00 Stock Bs Returns, s -14.50% 21.80 30.50 -7.60 26.30 Year

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Year 2014 2015 2016 2017 2018 Stock A's Returns, PA -18.00% 33.00 15.00 -0.50 27.00 Stock Bs Returns, s -14.50% 21.80 30.50 -7.60 26.30 Year 2014 2015 2016 2017 2018 Stock C's Return, c 32.00% -11.75 10.75 32.25 -6.75 In part b, you should see that the standard deviation of the portfolio decreased only 2 slightly because Stocks and B were highly positively correlated with each other. The addition of Stock C causes the standard deviation of the portfolio to decline dramatically, even though Oc = 0A = 06. What does this change indicate about the > correlation between Stock C and Stocks A and B? Would you prefer to hold a portfolio consisting only of Stocks A and B or a portfolio that also includes Stock C? If others react similarly, how might this fact affect the stocks' prices and rates of return

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