You create a portfolio using two stocks A and B with correlation coefficient equal to 0.6.

• You invest 40% in A that has expected return 10% and variance 0.01
• You invest 60% in B that has expected return 20% and variance 0.02

1,What is the expected return of the portfolio?

a.

14%

b.

15%

c.

17%

d.

19%

e.

16%

f.

11%

g.

12%

h.

13%

2.,What is the standard deviation of the portfolio?

a.

0.0088

b.

0.0156

c.

0.1135

d.

0.1246

e.

0.0109

f.

0.0

g.

0.02

h.

0.1416

i.

0.1043

j.

0.01287