Question: need asap i have 30 min left please i will upvote You are interested in investing in stocks L and M and based on the

need asap i have 30 min left please i will upvote

You are interested in investing in stocks L and M and based on the capital asset pricing model, the expected return of stock L is 25% and the expected return of M is 30%. The standard deviation of stocks L and M are 0.3 and 0.4 respectively. Your broker has recommended that you create a portfolio consisting of 20% of stock L and 80% of stock M in ordier to maximize your return and minimize risk: L. Calculate the expected refurn and standard deviation when the correlation coefficient between the stocks is 0.4 , 4 marks) ii. Colculate the standard deviation when the correlation coefficlent between the stocks is -0.4 (3 marks) iii. Demonstrate by appropriate calculations whether of not diversification has been achieved (4 marks) Iv. Based on parts i) and in above how does the correlation coefficient affect the standard deviation of the portfolio (4 natks)

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