Question: The expected returns, standard deviations, and correlation for Chartreuse Corporation and Lavender Ltd. are shown below. Expected Return Standard Deviation of Returns Chartreuse 12% 40%

The expected returns, standard deviations, and correlation for Chartreuse Corporation and Lavender Ltd. are shown below. Expected Return Standard Deviation of Returns Chartreuse 12% 40% Lavender 4% 25% Correlation(Chartreuse, Lavender) = -0.20 a. You have $10,000 to invest and are trying to decide how much money to invest in each of the two companies. Calculate the expected return and the standard deviation for a portfolio consisting of $2000 of Chartreuse and $8000 of Lavender. b. What is the lowest possible standard deviation for a portfolio consisting of Chartreuse and Lavender? What allocation between Chartreuse and Lavender produces the lowest standard deviation

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