Question 2 (30 marks) a) Consider two risky stocks X and Y. Stock Y has an expected return of 16% and a standard deviation of 13%. Stock X has an expected return of 20% and a standard deviation of 25%. The correlation between the returns of X and Y is +0.3. i) What is the expected return and standard deviation of a portfolio with 40% in Y and 60% in X? (8 marks) ii) Is there any diversification benefit resulting from forming the portfolio? Support your conclusion with calculations. (4 marks)