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 standard deviation of return on the optimal risky portfolio is. _. A. 0% B. 5% C. 7% D. 20%
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 standard deviation of return on the optimal risky portfolio is. _. A. 0% B. 5% C. 7% D. 20%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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![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 standard deviation of return on the optimal risky portfolio is
A. 0% B. 5% C. 7% D. 20%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb1df83bb-7fec-49a0-9789-38420e065d59%2F15bd3ebe-f4a2-4269-823f-2ab5972ece41%2F1icpodw_processed.png&w=3840&q=75)
Transcribed Image Text: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 standard deviation of return on the optimal risky portfolio is
A. 0% B. 5% C. 7% D. 20%
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