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Arbor Systems and Gencore stocks both have a volatility of 46 %. Compute the volatility of a portfolio with 50 % invested in each stock

Arbor Systems and Gencore stocks both have a volatility of 46 %. Compute the volatility of a portfolio with 50 % invested in each stock if the correlation between the stocks is:

(a) +1.00

(b) 0.50

(c) 0.00

(d) -0.50

(e) -1.00.

In which of the cases is the volatility lower than that of the original stocks?

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