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Debra is an investor just starting out in the stockmarket. She starts with a purchase of $10,000 of shares in ABC Ltd which has a

Debra is an investor just starting out in the stockmarket. She starts with a purchase of $10,000 of shares in ABC Ltd which has a standard deviation of returns of 10% p.a. She then invests another $10,000 purchasing shares in XYZ Ltd which has a standard deviation of returns of 40% p.a.. She estimates that the standard deviation of returns of her portfolio has increased from 10% p.a. before the XYZ purchase to 22% p.a. after the purchase.

Which of the following statements correctly describe what has happened (or could have happened) to the risk position of Debras portfolio following the investment in XYZ?

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