Gunnings stock has exhibited a standard deviation in returns

Gunnings stock has exhibited a standard deviation in returns of 0.5, whereas Avonlea

                  stock has exhibited a standard deviation of 0.9. The correlation coefficient between the

                  stock returns is 0.2. What is the standard deviation of a portfolio composed of 65%

                  Gunnings and 35% Avonlea?

a.

0.56676

b.

0.32122

c.

0.50578

d.

0.49578

Solution

0.5 * 0.65    +    0.9 * 0.35

0.325 +   0.315

0.64

0.2 / 0.64 = 0.3125