Suppose that your friend has decided to construct a portfolio that will contain stocks X and Y. The standard deviations of stock X and stock Y are 12% and 16% respectively, and the correlation between stock X and stock Y is 0.6. Your friend has decided to put 40% of his money on stock X and the rest on stock Y. What is the standard deviation of his portfolio?

a. 8.59%

b. 9.03%

c. 10.88%

d. 13.06%

Answer: D

can someone explain how? in steps