Practice Problem Suppose we are given the following information on stocks A and B: E(r) σ Stock A 15% 20% Stock B 10% 30% Let's examine some portfolios that combine stocks A and B: Assume that PAB= 0, what would be the expected return and standard deviation on a portfolio with 80% in stock A and 20% in stock B? E(r) = Op Question: Is a larger or smaller than A and B? Answer: Assume that PAB = -1, what would be the standard deviation on a portfolio with 80% in stock A and 20% in stock B? Tp Question: Is op larger or smaller than A and B?