Question: Consider the following information about the expected return and volatility of Microsoft and Walmart Stock: Expected Return Microsoft: 7.1% Volatility Microsoft: 25.6% Expected Return Walmart:

Consider the following information about the expected return and volatility of Microsoft and Walmart Stock:

Expected Return Microsoft:7.1%

Volatility Microsoft:25.6%

Expected Return Walmart:8.3%

Volatility Walmart:23.7%

Correlation between Microsoft and Walmart:0.9

The volatility of an equally weighted portfolio of Microsoft and Walmart is closest to:

(Hint: use the formula for the variance of a two stock portfolio plus the formula thatCov(Ri , Rj ) =corr(Ri , Rj )*SD(Ri)*SD(Rj ) )

a. 17.46

b. 24.03

c. 20.99

d. 24.65

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