Use this table to answer following questions. Please round your answers to two decimals.

	A	B
Expected Return	15%	20%
Standard Deviation	20%	22%

Correlation between returns = 0.5

a) Mike Jones has inherited 100,000 and would like to invest it in the stock market. He has decided that he will invest all 100,000 in share A. You spent a number of weeks in your finance class, explain in detail to Mike Jones why his planned investment decision is not optimal and make a recommendation as to what he could do in order to improve the risk/return profile of his portfolio?

b) Mike Jones has followed your advice and decide to invest 60% of his money in share A and the remainder in share B. What are the standard deviation of returns on his portfolio?

c) How would your answers to part (a) change if the correlation coefficient were 0 or if it were -0.5? Explain your calculations. What do the results tell us about choosing shares for a portfolio?