Question: QUESTION 2 (a) Calculate the annual returns and standard deviation of annual returns for the following portfolio. Assume that a correlation coefficient of 0.235 between

QUESTION 2 (a) Calculate the annual returns and standard deviation of annual returns for the following portfolio. Assume that a correlation coefficient of 0.235 between the returns of the two stocks. (Calculations must be done manually. Show all workings: P1 Portfolio: P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 Stock A 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Stock B 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Return ERPIERP2 ERP ERP ERP ERP ERP ERP ERP ERP10 ERP11 S.D. SDP SDP2 SDP SDM SDP SDP SDP SDP SDP SDP10 SDP11 (22 marks) (b) Which of the stock combination can achieve the objective of diversification. Justify your (4 marks)

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