(Computing the standard deviation for a portfolio of two risky investments) Answer
the following questions using the information provided in Problem 8–3:
a. Answer part a of Problem 8–3 where Mary decides to invest 10 percent of her
money in Firm A’s common stock and 90 percent in Firm B’s common stock.
b. Answer part a of Problem 8–3 where Mary decides to invest 90 percent of her
money in Firm A’s common stock and 10 percent in Firm B’s common stock.
c. Recompute your responses to both parts a and b where the correlation between the
two firms’ stock returns is −60.
d. Summarize what your analysis tells you about portfolio risk when combining
risky assets in a portfolio.
