Stocks E and S each have an expected return of 11%, a beta o…
Stocks E and S each have an expected return of 11%, a beta of 1.0, and a standard deviation of 20%. The risk-free rate of return (rRF) is 4%. Assume that the market is in equilibrium. The returns on the two stocks have a correlation of 0.75. Portfolio P has 35% in Stock E and 65% in Stock S. Which of the following statements is CORRECT?