Question: Suppose the ecpected returns and standard deviations of stocks A and B are E(R)=0.15, E(R)=0.25, deviation is A=0.1,B=0.2 respectively.
A. Calucate the expected return and standard deviation of a portfolio that is composed of 40% A and 60% B when the correlation between the returns on A and B =-0.15
B. Calculate the standard deviation of a portfolio that is composed of 40% A & 60% B when the correlation coefficient between the returns on A and B is -0.15.
C. How does the correlation between the returns on A and B affect the standard deviation of the portfolio?