Consider the following portfolio:

Financial instrument       Expected return               Standard deviation

A                                             15%                                        3%

B                                             25%                                        12%

C                                             9%                                          3%

Instructions:

1. Determine the expected return of the portfolio if you want to distribute your investment at 30% A, 40% B and 30% in C.

2. Determine the standard deviation of the portfolio.

3. Determine the expected return of the portfolio if you want to distribute your investment at 35% A, 25% B and 40% in C.

4. Determine the standard deviation of the portfolio.

5. Identify the distribution of investment that provides increased performance and a lower standard deviation.