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QUESTION 4 a [ 7 Marks] The Bank of Tinytown has two loans that have the following characteristics. If the covariance between A and B is 0.0035, what are the expected return and standard deviation of this portfolio? Given the covariance, can the calculation be simplified? What will the risk of the portfolio be, given the simplification? Loan Size ($ million) Return (%) Variance (%) Loan A $ 600.0 5.0 5.0 Loan B $ 1,200.0 8.0 7.5 QUESTION 4b [ 3 Marks] Briefly describe any way(s) that the risk of this portfolio may be reduced? Be specific. QUESTION 4 a [ 7 Marks] The Bank of Tinytown has two loans that have the following characteristics. If the covariance between A and B is 0.0035, what are the expected return and standard deviation of this portfolio? Given the covariance, can the calculation be simplified? What will the risk of the portfolio be, given the simplification? Loan Size ($ million) Return (%) Variance (%) Loan A $ 600.0 5.0 5.0 Loan B $ 1,200.0 8.0 7.5 QUESTION 4b [ 3 Marks] Briefly describe any way(s) that the risk of this portfolio may be reduced? Be specific