55.1
1. You invest 60% of your money in Amazon.com and
40% in General Motors. Assume that the standard deviation of
Amazon.com is 80% and the standard deviation of GM is 30%. The
correlation coefficient between Amazon.com and GM is 0.2.
a. What is the standard deviation of your portfolio?
b. Is this standard deviation different from just the simple weighted (60% in Amazon.com and 40% in GM) average of the standard deviations of the two stocks? If so, why?