A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 24% while stock B has a standard deviation of return of 18%. Stock A comprises 60% of the portfolio while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is _________. 

A.0.583

B. 0.225

C. 0.327

D. 0.128

0.0380 = (.62)(.242) + (.42)(.182) + 2(.6)(.4)(.24)(.18) ; = 0.583

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Answer WA 60 WB 40 SDa 24 SDb 18 Standard Deviation of Portfolio 00380 CO... View the full answer