Question: You are given the following information concerning two stocks: a) What is the expected return on a portfolio consisting of 40 percent in stock A

You are given the following information concerning two stocks:

a) What is the expected return on a portfolio consisting of 40 percent in stock A and 60 percent in stock B?
b) What is the standard deviation of this portfolio?
c) Discuss the risk and return associated with investing (a) all your funds in stock A, (b) all your funds in stock B, and (c) 40 percent in A and 60 percent in B. (This answer must use the numerical information in your answers derivedabove.)

Expected return on stock A Expected return on stock B Standard deviation of returns 12% 20% stock A stock B 1.0 6.0 Correlation coefficient of the returns on stocks A and B

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