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Given the following information: Expected return on Stock A .15 (15%) Standard deviation of return 0.3...

Given the following information:

Expected return on Stock A .15 (15%)

Standard deviation of return 0.3

Expected return on Stock B .18 (18%)

Standard deviation of return 0.4

Correlation coefficient of the returns on Stock A and Stock B 0.75

a. What are the expected returns and standard deviations of the following portfolios?

1. 100 percent of funds invested in Stock A

2. 100 percent of funds invested in Stock B

3. 50 percent of funds invested in each stock?

b. What would be the impact if the correlation coefficient were -0.42 instead of 0.75?

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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