In Problem 12, what is the standard deviation if the correlation is +1? 0? 1? As the

In Problem 12, what is the standard deviation if the correlation is +1? 0? ˆ’1? As the correlation declines from +1 to ˆ’1 here, what do you see happening to portfolio volatility? Why?

Data From Problem 12

Use the following information to calculate the expected return and standard deviation of a portfolio that is 50 percent invested in 3 Doors, Inc., and 50 percent invested in Down Co.:

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3 Doors, Inc. Down Co. Expected return, E(R) Standard deviation, o 14% 10% 42 31 .10 Correlation