You wish to combine two stocks, Encor and Maestro, into a portfolio with an expected return of 16 percent. The expected return of Encor is 2 percent with a standard deviation of 1 percent. The expected return of Maestro is 25 percent with a standard deviation of 10 percent. The correlation between the two stocks is 0.4.
a. What is the composition (weights) of the portfolio?
b. What is the portfolio standard deviation?