Question: We have two stocks with random gross returns X and Y. Both X and Y follows a normal distribution with mean=1.2 and SD=0.2. We combine

We have two stocks with random gross returns X and Y. Both X and Y follows a normal distribution with mean=1.2 and SD=0.2. We combine the two stocks evenly to get a portfolio.

a.When the correlation between the X and Y is 0.5, what is the probability that the gross return from the portfolio is less than 1? (gross return<1 means a loss in the investment)

b. When the correlation between the X and Y is -0.5, what is the probability that the gross return from the portfolio is less than 1? (gross return<1 means a loss in the investment)

c.Can you explain the result?

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