A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels returns is 0.65. The expected returns and standard deviations of the two stocks are given in the table below:

(a) What is the expected return of the hedge funds portfolio? Also compute the standard deviation.

(b) Suppose the correlation between Intel and Oracles stock increases, but nothing else changes. Would the portfolio become more or less risky with this change? Why?

\begin{tabular}{lcc} & Expected Return & Standard Deviation \\ \hline Oracle & 12.00% & 45.00% \\ Intel & 14.50% & 40.00% \\ \hline \end{tabular}