Suppose Target's stock has an expected return of 24% and a volatility of 38%, Hershey's stock has an expected return of 13% and a volatility of 24%, and these two stocks are
uncorrelated
a. What is the expected return and volatility of an equally weighted portfolio of the two stocks?
Consider a new stock with an expected return of 18.5% and a volatility of 27%. Suppose this new stock is uncorrelated with Target's and Hershey's stock.
b. Is holding this stock alone attractive compared to holding the portfolio in (a)?
c. Can you improve upon your portfolio in (a) by adding this new stock to vour portfolio? Exolain.