Question: Beta Average Return Standard Deviation Correlation Company 1 1.43 0.87% 0.10627614 0.78989803 Company 2 1.66 0.56% 0.113154679 Using the info above answer the following questions.

	Beta	Average Return	Standard Deviation	Correlation
Company 1	1.43	0.87%	0.10627614	0.78989803
Company 2	1.66	0.56%	0.113154679	0.78989803

Using the info above answer the following questions.

Investing $27,000 (60 percent) in Stock 1 and $18,000(40 percent) in stock 2. the total invested is $45,000

1. What is the standard deviation of your portfolio?

2. What is the beta of your portfolio?

3.Assume all you know is each companys beta, and that the market risk premium is 5.60% and the risk-free rate is 0.09% (using the 3-month T-bill yield as the risk-free proxy).Using the Capital Asset Pricing Model (CAPM), what is the expected return for each company?

4. How does the correlation coefficient of the two stocks impact the standard deviation of your portfolio? Would a positive or negative correlation drive the risk of your portfolio up, and why?

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