Question: Consider the following information about the expected return and volatility of Microsoft and Walmart Stock: Expected Return Microsoft: 7.2% Volatility Microsoft: 25.1% Expected Return Walmart:

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

Expected Return Microsoft:7.2%

Volatility Microsoft:25.1%

Expected Return Walmart:9.8%

Volatility Walmart:27.9%

Correlation between Microsoft and Walmart:0.7

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. 24.44

b. 21.79

c.18.77

d. 26.50

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