5. Portfolio Analysis. [25 Marks] Here are returns and standard deviations for two stocks. Stock X Stock Y Stock Z 18 33 16 Expected return (%) Standard deviation (%) 15 18 22 ECO-20007 (June 2022) Page 6 of 12 a. Calculate the expected return and standard deviation of a portfolio that is 60% invested in stock X and 40% invested in Stock Y. (Assume the correlation is 0). Provide full details of your calculations. [4 Marks] b. What would be the standard deviation of the portfolio from part (a) if the correlation was +1 and -1? Provide full details of your calculations. [6 Marks] c. If the correlation between returns on stocks X and Y declines from +1 to -1 here, what do you see happening to portfolio volatility? Why? Explain your answer. [5 Marks] d. What proportions would need to be invested in stock Y and stock Z to construct the minimum variance portfolio? (Assume the correlation is -0.7). What is the expected return and standard deviation of the minimum variance portfolio? Provide full details of your calculations. [6 Marks] e. Stock Z has the lowest expected return and highest standard deviation among the three stocks. Would anybody be willing to hold the stock in an investment portfolio? Explain your answer. [4 Marks]