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Lambeth Walk invests two thirds of his fund in stock I and the balance in stock J. Both the expected return and standard deviation of

  1. Lambeth Walk invests two thirds of his fund in stock I and the balance in stock J. Both the expected return and standard deviation of return on I are 10%, and on J they are both 20%. Calculate the standard deviation of portfolio returns, assuming:
  • The correlation between the returns is 1.0
  • The correlation is 0
  • The correlation is -1

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