Essay
An analysis of the stock market produces the following information about the returns of two stocks: 
Assume that the returns are positively correlated, with 
12 = 0.80.
a. Find the mean and standard deviation of the return on a portfolio consisting of an equal investment in each of the two stocks.
b. Suppose that you wish to invest $1 million. Discuss whether you should invest your money in stock 1, stock 2, or a portfolio composed of an equal amount of investments on both stocks.
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a. The expected return on the portfolio ...View Answer
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