Question: Stock As expected return is 5.5% (annual) and standard deviation is 12% (annual). Stock Bs expected return is 3.5% (annual) and standard deviation is 15%

Stock As expected return is 5.5% (annual) and standard deviation is 12% (annual).

Stock Bs expected return is 3.5% (annual) and standard deviation is 15% (annual).

Assume that the correlation between stock A and B is 0.2. Also, assume that allocation associated to stocks A and B are 65% and 35%, respectively.

Answer the following.

(a) (4 points) Compute the return of the portfolio.

(b) (4 points) Compute the standard deviation of the portfolio.

(c) (4 points) Compute the portfolio Sharpe Ratio. Use rf = 0.08%.

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