Two securities have the following characteristics: Security A Security B Expected return 15% 12% Standard deviation 4%

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Two securities have the following characteristics:

Security A Security B Expected return 15% 12%

Standard deviation 4% 6%

Beta 0.90 –0.25 Furthermore, the correlation of returns between the securities is 1.0. Determine the risk (standard deviation) of a portfolio consisting of equal proportions of Securities A and B.

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