(Computing the standard deviation for a portfolio of two riskyinvestments) Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in business school.Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the common stock of Firm A and FirmB:
Expected Return Standard Deviation
Firm A's Common Stock 0.17 0.18
Firm B's Common Stock 0.16 0.25
Correlation Coefficient 0.50
a. If Mary invests half her money in each of the two commonstocks, what is the portfolio's expected rate of return and standard deviation in portfolio return?
b. Answer part a where the correlation between the two common stock investments is equal to zero.
c. Answer part a where the correlation between the two common stock investments is equal to plus 1.
d. Answer part a where the correlation between the two common stock investments is equal to minus 1.
e. Using your responses to questions along dash d, describe the relationship between the correlation and the risk and return of the portfolio