Portfolio Standard Deviation Suppose the expected returns and standard deviations of...

Portfolio Standard Deviation Suppose the expected returns and standard deviations of Stocks A and B are

a. Calculate the expected return and standard deviation of a portfolio that is composed of 35 percent A and 65 percent B when the correlation between the returns on A and B is .5.

b. Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on A and B is –.5.

c. How does the correlation between the returns on A and B affect the standard deviation of the portfolio?