Question: Consider the following information about the expected return and volatility of Microsoft and Walmart Stock: Expected Return Microsoft: 8.3% Volatility Microsoft: 27.6% Expected Return Walmart:

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

Expected Return Microsoft:8.3%

Volatility Microsoft:27.6%

Expected Return Walmart:8.7%

Volatility Walmart:30%

Correlation between Microsoft and Walmart:0.5

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.

24.95

b.

22.78

c.

20.39

d.

28.80

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