Question: Assume that an individual can either invest all of her resources in one of two securities A or B; or alternatively, she can diversify her investment between the two. The distribution of the returns are as follows:
Assume that the correlation between the returns from the two securities is zero.
a. Calculate each security's expected return, variance, and standard deviation.
b. Calculate the probability distribution of the returns on a mixed portfolio comprised of equal proportions of securities A and B. Also calculate the expected return, variance, and standard deviation.
c. Calculate the expected return and the variance of a mixed portfolio comprised of 75% of security A and 25% of security B.