Question: Given the following information: Expected return on Stock A . 0 9 , Standard deviation of return . 1 Expected return on Stock B .
Given the following information:
Expected return on Stock A Standard deviation of return
Expected return on Stock B Standard deviation of return
Correlation coefficient of the returns on Stock A and Stock B
a What are the expected returns and standard deviations of the following portfolios: percent of funds invested in stock A and the rest in stock B
b Suppose the correlation coefficient was then, what are the expected returns and standard deviations of the following portfolios: percent of funds invested in stock A and the rest in stock B
As an investor which situation you prefer a or b and why?
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