You are interested in creating a portfolio of two stocks – Zoomla Inc and Ooppl Inc. Over the last three years, an inves

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You are interested in creating a portfolio of two stocks –
Zoomla Inc and Ooppl Inc. Over the last three years, an investment
in Zoomla shares would have earned an average annualized return of
27%, with an annualized standard deviation (of returns) of 51%. An
investment in Ooppl shares would have earned an average annual
return of 21%, with an annualized standard deviation of 32%. The
three-year correlation in returns across the two stocks is
0.71.
Marking scheme:
Part a)
3 marks for correctly computing the portfolio return
3 marks for correctly computing the portfolio standard
deviation
4 marks for correctly answering the key question
Part b)
1 mark for correctly computing the portfolio return
1 mark for correctly computing the portfolio standard
deviation
3 marks for correctly answering the key question