Problem 4: Risk/Return and Portfolio Theory (20 marks) The past five years of stock returns for JBH and HVN are provided in the following table. The correlation between JBH and HVN is 0.81. Year 2015 2016 2017 2018 2019 JBH 8.10% 6.00% 4.50% -3.50% 6.70% HVN 7.60% 5.40% 11.20% -6.30% 3.90% A. What is the average annual return for JBH and HVN? (4 marks) B. What is the standard deviation of return for JBH and HVN? (5 marks) C. Which stock would you invest? Explain. (2 marks) D. Given the expected return for JBH and HVN calculated in part (a), what would be your portfolio return and standard deviation if you invested 40% of your capital in JBH and the remaining 60% in HVN? (4 marks) E. What if you increase your capital invested in JBH from 40% to 80%? What is your portfolio return and standard deviation? Is this more or less favourable? Explain