Question: Problem 3 - Increasing Correlations You create a portfolio that invests 3 0 % in stock A with E ( r A ) = 1

Problem 3- Increasing Correlations
You create a portfolio that invests 30% in stock A with E(rA)=10%,A=5% and 70% in stock B with E(rB)=20%,B=10%.
Estimate the expected return of the portfolio.
Estimate the standard deviation of the portfolio if the two stocks are uncorrelated.
Estimate the standard deviation of the portfolio if the two stocks have correlation 0.5.
Estimate the standard deviation of the portfolio if the two stocks are perfectly positively correlated.
*You can use the properties of expected value and variance to solve the last two questions of this problem faster.
Problem 3 - Increasing Correlations You create a

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