Mattson Corporation expects Stock M to give it a return of 18% per annum and Stock N to have a return of 20% per annum over the forthcoming financial period. a) Determine the expected return on...

Mattson Corporation expects Stock M to give it a return of 18% per annum and Stock N to have a return of 20% per annum over the forthcoming financial period.

a) Determine the expected return on Mattson Limited’s portfolio of Stocks M and N given that the expected fund to be spent by the corporation on Stock M is 70% in proportion and that to be spent on Stock N is 30%;

b) Calculate the weighted standard deviation of the portfolio of the two stocks given that the standard deviation of stock M is 25% and that of stock B is 40%;

c) Evaluate the covariance and standard deviation of the portfolio given that the stocks M and N have a correlation coefficient of 0.80.Comment on the correlation coefficient of the two stocks;

d) Breakdown the total portfolio risk in (c) above into risk contributions by the specific stocks M and N. Appraise the risk contributions by the individual stocks M and N.