Consider two risky securities A and B. A has an expected rate of return of 15% and a standard deviation of 20%. B has an expected rate of return of 10% and a standard deviation of 16%. The correlation coefficient of A and B is 0.2. Riskfree rate is 6%. The weights of A and B in the optimal risky portfolio are _____ and _____, respectively.
A. 
0.67; 0.33 

B. 
0.52; 0.48 

C. 
0.54; 0.46 

D. 
0.64; 0.36 

E. 
0.43; 0.57 
Weight of A = ((Return of A  Risk Free Rate) * (Standard
Deviation B)2  (Return of B  Risk Free Rate)*(Standard Deviation
A* Standard Deviation B*Correlation Coefficient ))/((Return of A 
Risk Free Rate) * (Standard Deviation B)2 +(Return of B  Risk Free
Rate) * (Standard Deviation A)2  ((Return of A  Risk Free Rate)
+(Return of B  Risk Free Rate))*(Standard Deviation A* Standard
Deviation B*Correlation Coefficient )))
=((15%6%)*16%^2(10%6%)*20%*16%*0.2)/(((15%6%)*16%^2+(10%6%)*20%^2((15%6%+10%6%)*20%*16%*0.2))=66.67%
or 0.67
Weight of B =10.67 =0.33 (Option a is correct option)
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