The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy is closest to ________
Consider the following expected returns, volatilities, and correlations:
Stock Expected
Return Standard
Deviation Correlation with
Duke Energy Correlation with
Microsoft Correlation with
Wal-Mart
Duke Energy 14% 6% 1.0 -1.0 0.0
Microsoft 44% 24% -1.0 1.0 0.7
Wal-Mart 23% 12% 0.0 0.7 1.0
A) 4.0%
B) 0.7%
C) 6.7%
D) 20.1%
Answer: C
Business
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