Suppose the annual risk-free rate is 1%. The expected annual return on IBM stock and its standard deviation is 5% and 0.25%, respectively. If a portfolio consisting of the risk-free asset and IBM stock yields a 2% annual return, what is the risk of the portfolio as measured by standard deviation?

a. 0.0345%. b. 0.0425%. c. 0.0515%. d. 0.0625%. e. None of the above.