$\backslash$table$[[,$IBM,AMZN$],[$E$($R$),0\mathrm{.}07,0\mathrm{.}11],[$Standard Deviation,$0\mathrm{.}10,0\mathrm{.}18],[$Correlation$,0\mathrm{.}45,]]$

Suppose you have the above data on IBM and Amazon, compute the expected return and the standard deviation of an equally weighted portfolio invested in the two securities$.$ Is there a diversification benefit? Please show your work and round to at least $3$ decimal places.

Tilda Co$.$ stock is currently priced at $$46.$ You expect its price in one year to be $$53$ and do not expect any dividends to be paid. The risk free rate is $4\mathrm{.}5\%,$ and the overall market is expected to return $10\mathrm{.}3\%.$

a$)$ What will be the current price of Tilda Co$.$ if the expected future price remains the same but its covariance with the market doubles? Please show your work and round to at least two decimal places.

b$)$ Assume that the actual price is less than what you have calculated in $2$a$).$ What does this say about its actual return compared to what is predicted by the security market line?

c$)$ If it is true that properly priced securities fall on the security market line, what would you expect to happen to the price of Tilda Co$.$ given that it is currently less than your calculation from part a$?$ Explain why you believe that a price change would occur.