Answer question #2. Thanks 1. (See BKM Chapter 7.2, Equations 7.2 and 7.7 for this question). Stock

Answer question #2. Thanks

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1. (See BKM Chapter 7.2, Equations 7.2 and 7.7 for this question). Stock A's expected return and standard deviation are E[RA] = 8% and A= 15%, while stock B's expected return and standard deviation are E[RB] = 12% and B= 21%. a) Determine the expected return and standard deviation of the return on a portfolio with weights OA=.35 and @B=.65 for the following alternative values of correlation between A and B: PAB=0.6 and PAB= -0.4. b) Assume now that PAB=-1.0 and find the portfolio p of stocks A and B that has no risk (i.e. such that p=0). Can you do the same when PAB=1.0? If not, why? If so, find that portfolio. c) Assume that PAB=0. Find the standard deviations of portfolios with the following expected returns: 8%, 9%, 10%, 11%, 12%, 13%, 14% and 15%. Plot the expected return-standard deviation pairs on a graph (with the standard deviations on the horizontal axis, and the expected returns on the vertical axis). 2. What is the current expected return of 12-months cash? What information is your answer based on? 1. (See BKM Chapter 7.2, Equations 7.2 and 7.7 for this question). Stock A's expected return and standard deviation are E[RA] = 8% and A= 15%, while stock B's expected return and standard deviation are E[RB] = 12% and B= 21%. a) Determine the expected return and standard deviation of the return on a portfolio with weights OA=.35 and @B=.65 for the following alternative values of correlation between A and B: PAB=0.6 and PAB= -0.4. b) Assume now that PAB=-1.0 and find the portfolio p of stocks A and B that has no risk (i.e. such that p=0). Can you do the same when PAB=1.0? If not, why? If so, find that portfolio. c) Assume that PAB=0. Find the standard deviations of portfolios with the following expected returns: 8%, 9%, 10%, 11%, 12%, 13%, 14% and 15%. Plot the expected return-standard deviation pairs on a graph (with the standard deviations on the horizontal axis, and the expected returns on the vertical axis). 2. What is the current expected return of 12-months cash? What information is your answer based on?