Given: E(R1) = 0:12 E(R2) = 0:16 E(1) = 0:04 E(2) = 0:06 Calculate the expected returns and expected standard deviations of a two-stock portfolio

Given: E(R1) = 0:12

E(R2) = 0:16

E(σ1) = 0:04

E(σ2) = 0:06

Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.70 under the following conditions.

a. w1 = 1.00

b. w1 = 0.75

c. w1 = 0.50

d. w1 = 0.25

e. w1 = 0.05

Plot the results on a return-risk graph. Without calculations, draw in what the curve would look like first if the correlation coefficient had been 0.00 and then if it had been −0.70.