Points)

(i) Given the following information:

Expected return on Stock A	.15 (15%)
Standard deviation of return	0.3
Expected return on Stock B	.18 (18%)
Standard deviation of return	0.4
Correlation coefficient of the returns on Stock A and Stock B	0.75

a. What are the expected returns and standard deviations of the following portfolios?

1. 100 percent of funds invested in Stock A

2. 100 percent of funds invested in Stock B

3. 50 percent of funds invested in each stock?

b. What would be the impact if the correlation coefficient were -0.42 instead of 0.75?

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