Question

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. The proportion of the optimal risky portfolio that should be invested in stock A is _________.

Group of answer choices

0%

60%

100%

40%

Answer #1

**Correct answer: 0%**

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 25% and a standard
deviation of return of 35%. Stock B has an expected return of 18%
and a standard deviation of return of 28%. The correlation
coefficient between the returns of A and B is .5. The risk-free
rate of return is 6%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 17% and a standard
deviation of return of 29%. Stock B has an expected return of 12%
and a standard deviation of return of 14%. The correlation
coefficient between the returns of A and B is .4. The risk-free
rate of return is 6%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 22% and a standard
deviation of return of 17%. Stock B has an expected return of 13%
and a standard deviation of return of 4%. The correlation
coefficient between the returns of A and B is .33. The risk-free
rate of return is 9%. The proportion of the optimal risky portfolio
that should be invested in stock A is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 22% and a standard
deviation of return of 20%. Stock B has an expected return of 12%
and a standard deviation of return of 4%. The correlation
coefficient between the returns of A and B is .35. The risk-free
rate of return is 9%. The proportion of the optimal risky portfolio
that should be invested in stock A is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 26% and a standard
deviation of return of 39%. Stock B has an expected return of 15%
and a standard deviation of return of 25%. The correlation
coefficient between the returns of A and B is .5. The risk-free
rate of return is 6%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 21% and a standard
deviation of return of 37%. Stock B has an expected return of 16%
and a standard deviation of return of 22%. The correlation
coefficient between the returns of A and B is .5. The risk-free
rate of return is 6%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 16% and a standard
deviation of return of 30%. Stock B has an expected return of 11%
and a standard deviation of return of 15%. The correlation
coefficient between the returns of A and B is .5. The risk-free
rate of return is 5%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 12% and a standard
deviation of return of 28%. Stock B has an expected return of 9%
and a standard deviation of return of 13%. The correlation
coefficient between the returns of A and B is .5. The risk-free
rate of return is 5%. The proportion of the optimal risky portfolio
that should be invested in stock B is...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 12% and a standard
deviation of return of 18.0%. Stock B has an expected return of 8%
and a standard deviation of return of 3%. The correlation
coefficient between the returns of A and B is 0.50. The risk-free
rate of return is 6%. The proportion of the optimal risky portfolio
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2. An investor can design a risky portfolio based on two stocks,
S and B. Stock S has an expected return of 12% and a standard
deviation of return of 25%. Stock B has an expected return of 10%
and a standard deviation of return of 20%. The correlation
coefficient between the returns of S and B is 0.4. The risk-free
rate of return is 5%
a. The proportion of the optimal risky portfolio that should be
invested in stock...

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