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  3. 1. you would like to invest in a portfolio of the

1. You would like to invest in a portfolio of the following two securities: Security...

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Finance

1. You would like to invest in a portfolio of the following two securities: Security A whose expected return is 25% per year and standard deviation is 26% per year and Security B whose expected return is 10% per year and standard deviation is 15% per year

a. What is the expected return on a portfolio that invested 40% in Security A and 60% in Security B?

b. If the correlation between the return on Security A and Security B is negative 0.50, what would be the standard deviation for the portfolio invested 40% in Security A and 60% in Security B?

c. Given your answer in part b would you reduce your risk by investing in this portfolio rather than investing all your money in security B? Answer Yes or No and explain.

Note. Need explanation on letter c only

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