You are evaluating a portfolio of the following two securities.

Expected returns Std. dev.

British 12.5% 26.4%

American 10.8 22.5

1. If the two securities had a correlation of 0.72 in 1990, what are the expected returns and Std. dev. of the portfolio consisting of 25% British and 75% American?
2. If the correlation increased to 0.85 in 2000, what are the expected returns and Std. dev. of the same portfolio?