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Here are some historical data on the risk characteristics of Ford and Harley Davidson.

Here are some historical data on the risk characteristics of Ford and Harley Davidson.

                                  Ford           Harley Davidson

Beta                 1.36                          0.87

Annual Standard Deviation of return (%)32.4                          16.2

a) The correlation coefficient of Ford’s return versus Harley Davidson is 0.41. What is the standard deviation of a portfolio invested half in each share?

b) What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills?

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