(Correlation, Diversification, Risk and Return) Use the following risk and return value to calculate the risk and return behavior for various combinations of assets A and B under different degrees of correlation:

Asset	Expected return k	Risk (standard deviation),
A	8%	5%
B	13%	10%

(a). If the returns of assets A and B are perfectly positively correlated, describe the range of (1) expected return and (2) risk associated with all possible portfolio combinations.

(1)

(2)

(b) If the returns of assets A and B are perfectly negatively correlated, describe the range of (1) expected return and (2) risk associated with all possible portfolio combinations.

(1)

*(2)

*( 0% risk < ?%)