QUESTION 12
The investor is presented with the two following stocks:
Expected Return 
Standard Deviation 

Stock A 
10% 
30% 
Stock B 
20% 
60% 
Assume that the correlation coefficient between the stocks is 1. What is the standard deviation of the return on the portfolio that invests 30% in stock A?
A. 
26% 

B. 
49% 

C. 
30% 

D. 
33% 
Investment made in Stock A = 30%
Remaining Investment in Stock B = 70%
Correlation Coefficient between Stocks = 1
Calculating the Standard Deviation of Return:
S.D. = 0.33 or 33%
Option D
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