A portfolio consisting of two securities has the following characteristics:

Security 1: 40% weight, 15% standard deviation

Security 2: 60% weight, 18% standard deviation If the correlation of returns between the two securities is 0.20, the portfolio's standard deviation of returns is closest to:

Exam-Like

1.8%. This option incorrectly calculates the portfolio variance instead of the standard deviation.

9.1%. This option incorrectly uses standard deviations instead of variances in the formula for the portfolio standard deviation.

13.4%. This option correctly calculates the portfolio standard deviation by taking the square root of the portfolio variance.

Chartered Financial Analyst Level 1