Your client asks you to create a two-asset portfolio which has an expected return of 17% and a return standard deviation of 11%. The client specifies that the portfolio should include 60% of stock Merlyn (named after her beloved mother) that has an expected return of 14% and a variance of 0.01 1. What should be the mean return and variance of the second stock (which has a weight of 40% in the portfolio), assuming the stocks have zero correlation? (1 point.) 2. What should be the mean return and variance of the second stock (which has a weight of 40% in the portfolio), assuming the stocks have covariance of 0.007? (1 point.)

\begin{tabular}{|c|c|c|c|} \hline Portfolio Mean return & 17% & & \\ \hline Portfolio Standard Deviation & 11% & & \\ \hline \multicolumn{4}{|l|}{ Portfolio weights } \\ \hline Merlyn & 60% & & \\ \hline Second stock & 40% & & \\ \hline \multicolumn{4}{|l|}{ Part (1) } \\ \hline & Merlyn & Second stock & get formula \\ \hline Expected return & 14.00% & & #N/A \\ \hline Variance & 0.01 & & #N/A \\ \hline Covariance & 0 & & \\ \hline \multicolumn{4}{|l|}{ Part (2) } \\ \hline & Merlyn & Second stock & \multirow[t]{3}{*}{ get formula } \\ \hline Expected return & 14.00% & & \\ \hline Variance & 0.01 & & \\ \hline Covariance & 0.007 & & \\ \hline \end{tabular}