Two stocks, X and Y, have the following characteristics:
E(X) = $50
E(Y) = $100
σ2x= 9,000
σ2y= 15,000
σxy= 7,500
If the weight of portfolio assets assigned to investment X is 0.4, compute the:
a. Portfolio expected return.
b. Portfolio risk.
c. Would you invest in stock X or stock Y? Explain.