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Irene Adler is considering investing in the common stock of Holmes and Watson. The following data are available for the two securities. .
................... Expected Return ..... Standard Deviation
Holmes .............. 0.12 ......................... 0.08
Watson ............. 0.16 .......................... 0.20 .
If she invests 60% of her funds in Holmes and 40% in Watson, and if the correlation of returns between these two securities is 0.45, what is the portfolio’s expected return and standard deviation? .
A. 14.4% and 13.70%
B. 13.6% and 11.03%
C. 13.6% and 13.70%
D. 14.4% and 11.03%
E. None of the above.
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