Can someone please answer #4 CORRECTLY AND ACCURATELY? Question is below and information that correlates with question is attached. Thank you!

Given the following two stock portfolio, with 40% invested in Stock A and 60% invested in Stock B:

State of Economy Probability Stock A (40%) Stock B (60%) Good .25 25% 10% Fair .5 10% 5% Poor .25 5% 0% Expected return 12.5% 5.00% Standard deviation 7.5% 3.54% CV 0.60 0.71

a. Calculate the expected return for the portfolio. b. Calculate the covariance between Stock A and B (COV(A,B)). c. Calculate the correlation coefficient. What are the upper and lower bounds for the correlation coefficient? d. Calculate the expected standard deviation of the portfolio. e. Construct the investment opportunity set for these two risky assets (use Excel if you like). f. Assume a risk free rate of 3%. Compute the Sharpe ratio for each portfolio in the investment opportunity set. Illustrate how the introduction of the risk-free asset changes the investment opportunity set. Can you identify the point of tangency?

PORTFOLIO OPTIMIZATION Inputs Display Risky Display on the Graph on the Graph Opportunity Set Risky Opportunity Set, Capital Allocation Line, and Indifference Curv + Capital Allocation Line + Indifference Curve Expected Standard Return/Mon Deviation E(ri) si Riskfree Rate (rf) Two Risky Assets and a Riskfree Asset 0.40% 0.00% 3 Exp Ret - Riskless Ei=E(ri)-rf 2.00% Expected Return / Month 1.50% 1.5% 0.00% 0.011395288 Risky Asset 1 1.50% 10.20% 1.10% Risky Asset 2 0.90% 5.00% 0.50% 1.00% 0.0068284394 0.50% Correlation (r) Risk Aversion 60.0% 2.4 4 16 9 0.9% 0.004 0.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 102 50 16 Standard Deviation (s) 24 Outputs Opp Set Curve Opp Set Curve Opp Set Curve Risky Asset Proportion Opp Set in Risky (x-axis) Curve Asset 1 or Standard Expected Opt Risky Deviation Ret / Mon -500.0% 40.8% -2.1% -150.0% 12.7% 0.0% -80.0% 7.7% 0.4% Capital Utility Optimal Allocation Indifference Complete Line Curve Portfolio Expected Expected Expected Ret / Mon Ret / Mon Ret / Mon 2 s w2s 12 1 w s 22 2w 1 w s 1s 2 2 Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opp Set Curve Opt Risky Port Cap Alloc Line Cap Alloc Line Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve -70.0% -60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 10.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% 250.0% 500.0% 39.9% 0.0% 1000.0% 7.1% 6.5% 6.0% 5.6% 5.3% 5.0% 5.0% 5.0% 5.2% 5.2% 5.9% 6.4% 6.9% 7.5% 8.1% 8.8% 9.5% 10.2% 10.9% 11.7% 21.8% 42.2% 6.3% 0.0% 63.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% s w2s 12 1 w s 22 2w 1 w s 1s 2 0.5% 0.5% 0.6% 0.7% 0.7% 0.8% 0.8% 0.9% 1.0% 1.0% 1.1% 1.1% 1.2% 1.3% 1.3% 1.4% 1.4% 1.5% 1.6% 1.6% 2.4% 3.9% E r wE r1 1 w E r2 w1 E1s 22 E2 s 1s 2 / E1s 22 E2s 12 E1 E2 s 1s 2 1.1% 0.4% 7.8% 0.54% 0.57% 0.64% 0.76% 0.93% 1.14% 1.41% 1.72% 2.08% 2.49% 2.94% Indifference Curve Indifference Curve Indifference Curve Indifference Curve Indifference Curve Opt Comp Port Constant Utility Value 11.0% 12.0% 13.0% 14.0% 15.0% 2.4% 0.0054 3.45% 4.00% 4.60% 5.25% 5.94% 0.7% on Line, and Indifference Curve 14.00%