Stock A Stock B

Expected Return 7% 4%

Standard Deviation 11% 7%

Investment Proportions 0.60 0.40

Correlation = 0.55

1. Based on the table above, what is the expected return of the portfolio invested in Stocks A and B as described in table above?

a. 4% b. 5.5 c. 5.8%

d. 7%

e. 11%

2. Based on the table above, what is the standard deviation of the portfolio invested in Stocks A and B as described in table above?

a. 8.47%

b. 8.82%

c. 10.61%

d. 18.34%

e. 22.99%

f. 51.8%

3. Based on the table above, construct the opportunity set for the portfolio invested into stocks A and B. Based on the opportunity set youve created, does the portfolio with investment weights of 60% invested in Stock A and 40% invested in Stock B lie on the efficient frontier?

a. Yes

b. No

c. Can not tell

d. Depends on which stock was purchased first