Suppose that all stocks can be grouped into two mutually exclusive portfolios, growth and value stocks. These two portfolios are equal in size (market value), their correlation of returns is 0.6 and they have the following charactersitics:

Value stocks: expected return 0.12 & volatility of 14%

Growth stocks: expected return 0.15 & volatility of 24%

The volatility on the market portfolio (a 50/50 combination of value and growth portfolios) is closest to:

a. 13.5%

b. 15.2%

c. 19.0%

d. 17.1%

5 E60