Consider Table $5,$ which presents expected returns, standard deviations, and correlations for

two stocks, stock $1$ and stock $2.$

$($a$)$ For stock $1$ and stock $2,$ calculate their average return, the variance of returns, and the

covariance between the returns on stock $1$ and stock $2.$ Detail all calculations that you use.

$($b$)$ Form a portfolio comprised of stock $1$ and stock $2.$ Calculate the expected return and variance

of returns for an equally$-$weighted portfolio of stock $1$ and stock $2.$

$($c$)$ Form a portfolio comprised of stock $1$ and stock $2.$ Calculate the expected return and variance

of returns of the minimum variance portfolio of stock $1$ and stock $2.$ Detail all calculations you

use.

$($d$)$ Sketch the minimum variance frontier showing combinations of stock $1$ and stock $2.$ Identify the

location of the equally$-$weighted and minimum variance portfolios on the minimum variance

frontier. Distinguish between the efficient and inefficient sections of the minimum variance

frontier.