You are in a world where there are only two assets, gold and stocks. You are interested in investing your

money in one, the other, or both assets. Consequently, you collect the following data on the returns on

the two assets over the past six years.

Gold

Stock Market

Average return

8%

20%

Standard deviation

25%

22%

Correlation

-0.4

Compute the expected return and standard deviation of a portfolio consisting of

a) 0% stocks

b) 25% stocks

c) 50% stocks

d) 75% stocks

e) 100% stocks

(the rest in gold).