Your client asks you to create a two-asset portfolio which has an expected return of 15% and a return standard deviation of 12%. The client specifies that the portfolio should include 60% of stock Merlyn (named after her beloved mother) that has an expected return of 13% and a variance of 0.01.

1. What are the mean return and the variance of the second stock (which has a weight of 40% in the portfolio), assuming the stocks have zero correlation? (1 point.)

2. What are the mean return and the variance of the second stock (which has a weight of 40% in the portfolio), assuming the stocks have covariance of 0.007? (1 point.)

Portfolio Mean Return	15%
Portfolio Standard Deviation	12%
Portfolio Weights
Merlyn	60%
Second Stock	40%

Part (1)

	Merlyn	Second Stock
Expected Return	13%	? (Need to figure out)
Variance	0.01	? (Need to figure out)
Covariance	0

Part (2)

	Merlyn	Second Stock
Expected Return	13%	? (Need to figure out)
Variance	0.01	? (Need to figure out)
Covariance	0.007