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QUESTION

Stock A has an expected return of 15% p. and Stock B also has an expected return 15% p. The standard deviation of return for stock A is 40% and the...

Stock A has an expected return of 15% p.a. and Stock B also has an expected return 15% p.a.

The standard deviation of return for stock A is 40% and the standard deviation of return for B is 30%.

(a) Using the above information and assuming the correlation between the returns is ρ.00 compute

* the expected return and

* standard deviation of return on a portfolio where you have $50 invested in stock A and $50 invested in stock B. Show your working.

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