Question

An investor wants to form a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 18%. Stock B has an expected return of 12% and a standard deviation of return of 18%. The correlation coefficient between the returns of A and B is -0.30. The risk-free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in stock A is ________.

A. 63.2%

B. 46.8%

C. 57.3%

D. 40.3%

Answer 1

Ans is C. 57.3%

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