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Question 4 (20 points) Consider an investor with $100,000. The table below presents data of two uncorrelated stocks (the stocks have correlation of zero) traded in the capital market: Stock Expected Return Standard Deviation A 20% 40% B 12% 30% a. What is the expected return of a portfolio which holds equal proportions of stocks A and B? Answer: Expected return of the portfolio: b. What is the standard deviation of the portfolio? Answer: Standard deviation of the portfolio: c. Consider a new stock, C, that is uncorrelated with A and B, with the following expected return and standard deviation: C Expected Return Standard Deviation 16% 35% Is holding only stock C is more attractive compared to holding an equally weighted portfolio comprised only from stocks A and B (the one you addressed in item a)? (Circle the correct answer and provide a detailed explanation) Answer: Yes/No

          Question 4 (20 points)
Consider an investor with $100,000. The table below presents data of two uncorrelated stocks
(the stocks have correlation of zero) traded in the capital market:
Stock	Expected Return	Standard Deviation
A	20%	40%
B	12%	30%
a. What is the expected return of a portfolio which holds equal proportions of stocks A and B?
Answer: Expected return of the portfolio:
b. What is the standard deviation of the portfolio?
Answer: Standard deviation of the portfolio:
c. Consider a new stock, C, that is uncorrelated with A and B, with the following expected return
and standard deviation:
C	Expected Return	Standard Deviation	
	16%	35%
Is holding only stock C is more attractive compared to holding an equally weighted portfolio
comprised only from stocks A and B (the one you addressed in item a)? (Circle the correct
answer and provide a detailed explanation)
Answer: Yes/No

Question 4 (20 points)
Consider an investor with 100,000. The table below presents data of two uncorrelated stocks
(the stocks have correlation of zero) traded in the capital market:
Stock Expected Return Standard Deviation
A 20% 40%
B 12% 30%
a. What is the expected return of a portfolio which holds equal proportions of stocks A and B?
Answer: Expected return of the portfolio:
b. What is the standard deviation of the portfolio?
Answer: Standard deviation of the portfolio:
c. Consider a new stock, C, that is uncorrelated with A and B, with the following expected return
and standard deviation:
C Expected Return Standard Deviation
16% 35%
Is holding only stock C is more attractive compared to holding an equally weighted portfolio
comprised only from stocks A and B (the one you addressed in item a)? (Circle the correct
answer and provide a detailed explanation)
Answer: Yes/No

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