Explanation:

The correct answer is B (2.1%).

1. Incorrect Interpretation (Option A): The calculation assumes a correlation of -1 (perfect negative correlation) instead of zero, leading to a portfolio standard deviation of 0%. This misinterprets the term "uncorrelated."

2. Correct Calculation (Option B): The portfolio standard deviation is calculated as follows:

   • Formula: $$\sigma_p = \sqrt{w_1^2 \sigma_1^2 + w_2^2 \sigma_2^2 + 2w_1w_2 \text{Cov}(R_1, R_2)}$$
   • Since the securities are uncorrelated, the covariance term is zero.
   • Substituting the values: \sigma_p = \sqrt{(0.5)^2 (3\%)^2 + (0.5)^2 (3\%)^2} = \sqrt{2.25 + 2.25} = \sqrt{4.5} \approx 2.1\% $`$3`. **Incorrect Interpretation (Option C):** This option incorrectly calculates the portfolio standard deviation as the weighted average of the individual standard deviations (3.0%), ignoring the diversification benefit of uncorrelated returns.