Question: Security A's expected return is 10% while the expected return of B is 14%. The standard deviation of A's returns is 5%, and it is

Security A's expected return is 10% while the expected return of B is 14%. The standard deviation of A's returns is 5%, and it is 9% for B. An investor plans to invest equal amounts in A and B. Which of the following statements is true about this portfolio consisting of stock A and stock B.

The lower the correlation of returns between the two stocks, the lower the portfolio's risk.

The risk of the portfolio is primarily dependent on the utility function of the investor.

The higher positive correlation of returns between the two stocks, the lower the portfolio's risk.

The risk of the portfolio is equal to 7%.

Risk do not exists.

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