Question: Consider the following expected returns, volatilities, and correlations: Stock Expected Return Standard Deviation Correlation with Duke Energy Correlation with Microsoft Correlation with Wal-Mart 6.00% 1.00

Consider the following expected returns, volatilities, and correlations: Stock Expected Return

Consider the following expected returns, volatilities, and correlations: Stock Expected Return Standard Deviation Correlation with Duke Energy Correlation with Microsoft Correlation with Wal-Mart 6.00% 1.00 - 1.00 0.00 Duke Energy 14.00% Microsoft 11.00% 24.00% -1.00 1.00 0.70 Wal-Mart 9.00% 14.00% 0.00 0.70 1.00 Determine the two stocks would give you the biggest reduction in risk. Assuming you could form a portfolio that was invested 50.00% in each stock, what would the expected standard deviation of the portfolio be? Report your answer as a percentage reported to two decimal places (e.g. 1.23). Do not include a percentage sign in your response (e.g. %)

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