25. Listed here are estimates of the standard deviations and correlation coefficients for three stocks.

a. If a portfolio is composed of 20% of stock A and 80% of stock C, what is the portfolio's standard deviation?

b. If a portfolio is composed of 40% of stock A, 20% of stock B, and 40% of stock C, what is the portfolio's standard deviation?

c. If you were asked to design a portfolio using stocks A and B, what percentage investment in each stock would produce a zero standard deviation?
[Hint: Some algebra is necessary to solve this problem. Remember that Xu = (1 - XA ) · ]

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Correlation with Stock: Standard Stock Deviation A C A 12% 1.00 -1.00 0.20 15 -1.00 1.00 -0.20 C 10 0.20 -0.20 1.00