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Business, 12.10.2020 23:01 oliviaclerk5

Bob has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8%, and a standard deviation of 25%. Becky also has a $50,000 portfolio, but it has a beta of 0.8, an expected return of 9.2%, and a standard deviation that is also 25%. The correlation coefficient, r, between Bob's and Becky's portfolios is zero. If Bob and Becky marry and combine their portfolios, which of the following best describes their combined $100,000 portfolio? A. The combined portfolio's expected return is a simple average of the expected returns of the two individual portfolios (10%).B. The combined portfolio's beta is a simple average of the betas of the two individual portfolios (1.0).C. The combined portfolio's standard deviation is less than a simple average of the two portfolios' standard deviations (25%), even though there is no correlation between the returns of the two portfolios. D. Statements A and B are correct. E. All of the statements above are correct.

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