Arbor Systems and Gencore stocks both have a volatility of 43%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is

(a) +1, (b)

0.50,

(c) 0,

(d) -0.50, and

(e) -1.0. In which cases is the volatility lower than that of the original stocks?

AppendixLO1