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You consider buying both Stock A and Stock B to make a portfolio to reduce some unsystematic risk. Both stocks will be weighted equally in

You consider buying both Stock A and Stock B to make a portfolio to reduce some unsystematic risk. Both stocks will be weighted equally in the portfolio. Stock A has an expected return of 11% and a standard deviation of 18%. Stock B has an expected return of 8% and a standard deviation of 20%. If the correlation of the stocks is 1, can you reduce the unsystematic risk?

Yes: the standard deviation of the two-stock portfolio will be lower than the average standard deviation of two.

Yes: the standard deviation of the two-stock portfolio will be higher than the average standard deviation of two.

No: the standard deviation of the two-stock portfolio will be the same as the average standard deviation of two.

No: the standard deviation of the two-stock portfolio will be higher than the average standard deviation of two.

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