You construct an equally weighted, two asset portfolio between ACME Corp, an American valve and regulator manufacturer, and Wayne Enterprises, a Hong Kong property company
The standard deviation of the returns on ACME's shares is 30% and 55% on Wayne Enterprises. Because of the international diversification, the returns on the two companies have no covariance (correlation = zero). What is the standard deviation of returns of the portfolio?
A) 9.81%
B) 17.60%
C) 22.50%
D) 31.32%
E) 42.50%
D
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