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You have two friends, Angelo and Bethany, with two very good business ideas. Based on your calculations, Angelos idea, call it idea A, has an expected return of 12 percent and a standard deviation of 9 percent. Bethanys idea, call it idea B, has an expected return of 15 percent and a standard deviation of 14 percent. The covariance of the returns generated by the two ideas is 0.00756.

If you invest 80% in A and 20% in B, what is the expected return and risk (standard deviation) for your investment portfolio?

a.

11.80% and 7.66%

b.

11.80% and 4.55%

c.

12.60% and 3.45%

d.

13.55% and 9.04%

e.

12.60% and 5.96%