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Question No. 2 (10+10 Marks) a) Listed here are estimates of the standard deviations and correlation coefficients for three stocks. Stocks A B Standard Deviation 12% 15% 10% Correlation with Stocks A B 1.00 -1.00 0.20 -1.00 1.00 -0.20 0.20 -0.20 1.00 a) If a portfolio is composed of 20% of stock A and 80% of stock C, what is the portfolio's standard deviation? b) If a portfolio is composed of 40% of stock A, 20% of stock B, and 40% of stock C, what is the portfolio's standard deviation? c) If you were asked to design a portfolio using stocks A and B, what percentage investment in each stock would produce a zero-standard deviation? b) Assume that Assets I has an expected return of 15% with standard deviation of 30% and asset 2 has an expected return of 10% and standard deviation of 20%. The risk-free rate is 7%. Calculate the portfolio cxpected return and standard deviation for various portfolio. Assume the correlation coefficient of 1.0. -1, and -0.40. a) calculate the minimum variance portfolio, assuming short sales are not allowed b) calculate the optimal risky portfolio, assuming short sales are not allowed Act