Question: Investor’s daily, a magazine rating stocks and mutual funds, has predicted that stock A will have annual return 10% with a standard deviation of 4%, and stock B will have annual return 20% with a standard deviation of 10%. They have also calculated that the correlation between the return of these stocks is -0.2.

a) What is the expected annual return on a portfolio that invests 30% in A and 70% in B? How about the standard deviation of the portfolio return?

b) What is the probability that the portfolio will have a negative return