[See Solution] Irene is considering investing in the common stock of Holmes and Watson. The following data are available for the two securities: HOLMES


Question: Irene is considering investing in the common stock of Holmes and Watson.  The following data are available for the two securities:

HOLMES            WATSON

Expected Return            .12                    .16

Standard Deviation          .08                    .20

If she invests 60% of her funds in Watson and 40% in Holmes, and if the correlation of returns between these two securities is 0.45, what is the portfolio's expected return and standard deviation?

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