Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Portfolio P consists of 50% X and 50% Y. Given this information, which of the following statements is CORRECT?
A. Portfolio P has a standard deviation of 20%.
B. The required return on Portfolio P is equal to the market risk premium (rM- rRF).
C. Portfolio P has a beta of 0.7.
D. Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, rRF.
E. Portfolio P has the same required return as the market (rM).
Answer: E
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