Information on stocks E & F which have a correlation coefficient of 0.5 appear below:

	Stock E	Stock F
Expected Return	20%	30%
Standard Deviation	0.4	0.5

Your uncle has savings of $20,000 and was thinking of investing 70% of this amount in stock E and the remainder in stock F.

Required:

2. Calculate the expected return and standard deviation of your uncle's portfolio.
4. Demonstrate by appropriate calculations whether or not diversification has been achieved by combining these two stocks in a portfolio
6. Your uncle is worried about taking risks as he is close to retirement age. Advise him on what actions he could take to establish a portfolio that is less risky. Provide calculations to show that the proposed portfolio is less risky.