5. Given: E(R1) = 0.10 E(R2) = 0.15 ₁ = .03 2 = .05 Calculate the expected returns and expected standard deviations of a two-stock portfolio in which Stock 1 has a weight of 60 percent under the following conditions: a. r₁,₂ = 1.00 b. r₁,₂ = 0.75 c. r1,2 = 0.25 d. r1,2 = 0.00 e. r1,2 = 0.25 f. r1,2 = 0.75 g. r1,2 = 1.00

Expected Return= E(Rp) = WiRi +++ = ( 0.600.10) + (0.400.15) = 0.12

w₁²₁² + w₂²₂² + 2w₁w₂Cov. (port) = (port) =

1. (port) =

1. (port) = =

1. (port) = =

1. (port) = =

1. (port) = =

1. (port) = =

1. (port) = =

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

Expected Return= E(Rp) = WiRi +++ =

1. (port) =

Given: E(R1) = 0.12 E(R2) = 0.16 1 = 0.04 2 = 0.06 Plot the results on a return-risk graph. Without calculations, draw in what a curve with varying weights would look like if the correlation coefficient had been 0.00, or if it had been 0.70.

Expected Return= E(Rp) = WiRi +++ =