Consider the following information on the expected return and risk of two assets: E(R1) = 10%, 1, = 14% E(R2) = 16%, 2 = 16%

Consider the following information on the expected return and risk of two assets:
E(R1) = 10%, σ1, = 14%
E(R2) = 16%, σ2 = 16%
a. Calculate the expected return and risk of portfolios invested in the following proportions listed. Assume a correlation of p = 0.5.
Asset 1 Asset 2
100%................................... 0%
80%..................................... 20%
60%..................................... 40%
50%..................................... 50%
40%..................................... 60%
20%..................................... 80%
0%....................................... 100%
Use the expected return and risk calculations for all the portfolios to plot the efficient frontier.
b. Repeat part (a), assuming p = -1, p = 0, and p = +1.
c. Looking at the four graphs you have just drawn for parts (a) and (b), what do you conclude about the importance of correlation in risk reduction?