A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Stock A B C Return Risk (Standard Deviation (R) 20% 10% 15% to 5) 25% 12% 10% Multiple Choice Pair of Stocks A to B A to C B to C What proportion of the portfolio should be allocated to stock B? Joint Risk (Covariance) 0.05 0.075 -0.05
A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Stock A B C Return Risk (Standard Deviation (R) 20% 10% 15% to 5) 25% 12% 10% Multiple Choice Pair of Stocks A to B A to C B to C What proportion of the portfolio should be allocated to stock B? Joint Risk (Covariance) 0.05 0.075 -0.05
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Subject :- finance
Transcribed Image Text:O
O
O
0.021
0.000
0.059
0.081
Transcribed Image Text:18
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A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant
data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk
within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper
allocation of the funds to each stock.
Stock
A
B
С
Return
(R)
20%
10%
15%
Multiple Choice
0.039
What proportion of the portfolio should be allocated to stock B?
0.021
Risk (Standard Deviation
to S)
0.000
25%
12%
10%
Pair of Stocks
A to B
A to C
B to C
Alaut
Joint Risk
(Covariance)
0.05
0.075
-0.05
ch
he
ks
ir regie
ble...
Jall que
where.
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