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Investments in storage facilities in San Diego, CA has a 62% return correlation with investments in...

Investments in storage facilities in San Diego, CA has a 62% return correlation with investments in multi-family properties in Atlanta. Based on the following information:

Expected return - San diego storage    7.0%

Expected return - multi-family Atlanta 8.0%

Standard Deviation of expected return - San Diego storage 12.5%

Standard Deviation of expected return - Multi-family Atlanta 15.0%

a) What is the expected return on a portfolio that invests 40% in San Diego storage facilities and 60% in Atlanta multi-family properties?

b) What can you say about the annual standard deviation of return of a portfolio that invests 40% in San Diego storage facilities and 60% in Atlanta multi-family properties? (hint: your answer should be smaller or larger than a specific percentage).

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