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An investor can design a risky portfolio based on two stocks, A and B. Stock A...

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 that should be invested in stock A is _________.

Multiple Choice

  • 56%

  • 32%

  • 50%

  • 0%

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