Explain the coefficient of correlation

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A portfolio has 40% of its funds invested in Security A and 60% of its funds invested in Security B. Security A has a standard deviation of 4. Security B has a standard deviation of 10. The securities have a coefficient of correlation of .5. Which of the following values is closest to portfolio variance?

(A) 48.12

(B) 59.01

(C) 6.94

(D) 1639.21

Please show how p(1,2)σ1σ2 is calculated.

Reference no: EM133066337

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