(Answered) Question assume the following information about two shares

Statistics

Question: Assume the following information about two shares A and B:

r_A = 12%, σ_A = 4%, r_B = 10%, σ_B = 10%, ρ_AB = -1

(a) What is the expected return and standard deviation of returns of a portfolio that consists of 60 percent of A and 40 percent of B?

(b) If the correlation coefficient ρAB were zero, would your answer to (a) change? If so, recompute the standard deviation and expected return of the portfolio.

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