Stock a and Stock B Each Have an Expected Return

Multiple Choice

Stock A and Stock B each have an expected return of 15 percent, a standard deviation of 20 percent, and a beta of 1.2. The returns of the two stocks are not perfectly correlated; the correlation coefficient is 0.6. You have put together a portfolio which is 50 percent Stock A and 50 percent Stock B. Which of the following statements is most correct?

A) The portfolio's expected return is 15 percent.
B) The portfolio's beta is less than 1.2.
C) The portfolio's standard deviation is 20 percent.
D) Statements a and b are correct.
E) All of the statements above are correct.