Given the information in Problem 8‐1, the risk (standard deviation) for a portfolio consisting of 50 percent invested in X and 50 percent invested in Y can be seen to be:

a. 19 percent

b. 16 percent

c. Less than 16 percent

d. More than 22 percent

Problem 8‐1

Given the following information: 

Standard deviation for stock X = 12 percent 

Standard deviation for stock Y = 20 percent 

Expected return for stock X = 16 percent 

Expected return for stock Y = 22 percent 

Correlation coefficient between X and Y = 0.30