5. Portfolio Analysis DO NOT USE EXCELI PLEASE SHOW ALL WORK BY HANDI Suppose there are two common stocks available for investment, stock A and stock B, with the following characteristics: Stock A Stock B Expected return: .10 .40 Standard deviation (o): .30 .20 Correlation coefficient (p): -.7 (A) Calculate the portfolio expected return and standard deviation of return for each of the following portfolios: Portfolio Proportion in A Proportion in B 1 1 0 2 2/3 1/3 3 1/3 2/3 0 1 (B) Sketch (this does not have to be a work of art, but try to be careful) the feasible set of all portfolios composed of A and B. (C) Suppose that there is now the opportunity to borrow or lend at the risk-free rate of return. which is 10%. Show on your sketch in part (B) how this changes the investment opportunities available. (Be sure to clearly label this "PART C".) (D) Assume you are a rational investor and can invest in stock A, stock B, the risk-free security, or any combination thereof. Further assume that you have $150,000 and decide to invest $60,000 in the risk-free security and $90,000 in risky securities. Approximately how much money will you invest in Security B? Briefly explain how you arrived at your