Answer: 2.7%.

The correct answer is **A (2.7%)**. The correlation (ρ) between the returns of the two securities is given by the formula: \[ ρ = \frac{Cov(R_i, R_j)}{σ_i σ_j} \] Given that the two securities have equal standard deviations (σ_i = σ_j = σ), the formula simplifies to: \[ 0.75 = \frac{5.5\%^2}{σ^2} \] Solving for σ: \[ σ = \sqrt{\frac{5.5\%^2}{0.75}} ≈ 2.7\% \] - **B (3.7%)** is incorrect as it miscalculates the standard deviation by assuming σ_i = 2σ_j. - **C (7.3%)** is incorrect as it represents an intermediate step in the calculation rather than the final result.

Author: LeetQuiz Editorial Team