Question: Here are the expected returns on two stocks:

Returns

Outcome Probability X Y

1 0.2 15% 7%

2 0.6 10% 12%

3 0.2 5% 17%

1. What is the expected return and the standard deviation of Security X?
2. What is the expected return and the standard deviation of Security Y?
3. What is the expected return and the standard deviation of a portfolio consisting of 50% Security X and 50% Security Y?
4. What is the correlation between Security X and Security Y? (Note: If you do the calculations in Parts A to C correctly, you do not have to do any calculations in Part D).

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