You are given the following information: a) What are the expected returns and standard deviations of a

Question:

You are given the following information:

a) What are the expected returns and standard deviations of a portfolio consisting of:
1. 100 percent in stock A?
2. 100 percent in stock B?
3. 50 percent in each stock?
4. 25 percent in stock A and 75 percent in stock B?
5. 75 percent in stock A and 25 percent in stock B?
b) Compare the above returns and the risk associated with each portfolio.
c) Redo the calculations assuming that the correlation coefficient of the returns on the two stocks is 20.6. What is the impact of this difference in the correlationcoefficient?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...