Question: Which of these two basic portfolios using standard deviations and the correlation coefficient would theoretically have less risk? Calculate the total standard deviation for each

Which of these two basic portfolios using standard deviations and the correlation coefficient would theoretically have less risk? Calculate the total standard deviation for each portfolio, show your work, and explain your answer.

Portfolio A:

$2,000,000 MSFT

$4,000,000 IBM

Total $6,000,000

MSFT Standard Dev: 3.4

IBM Standard Dev: 4.2

Correlation Coefficient: 0.85

Portfolio B:

$2,000,000 MSFT

$4,000,000 BAC

Total $6,000,000

MSFT Standard Dev: 3.4

BAC Standard Dev: 2.8

Correlation Coefficient: 0.45

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