Computing the standard deviation for a portfolio of two risky​ investments) 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 Firm​ B: LOADING... .   a. If Mary invests half her money in each of the two common​ stocks, 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 +1.

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(Computing the standard deviation for a portfolio of two risky​ investments) 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 Firm​ B:
LOADING...
.
 
a. If Mary invests half her money in each of the two common​ stocks, 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
+1.
d. Answer part a where the correlation between the two common stock investments is equal to
−1.
e. Using your responses to questions
a—d​,
describe the relationship between the correlation and the risk and return of the portfolio.
 
Expected          
Return            
Standard Deviation
Firm​ A's common stock
0.15
0.19
Firm​ B's common stock
0.17
0.24
Correlation coefficient
0.50
 
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