An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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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 21% and a standard
deviation of return of 39 %. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation
coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal
risky portfolio is
Multiple Choice
25.5%
22.3%
21.4%
20.7%
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Transcribed Image Text:An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39 %. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is Multiple Choice 25.5% 22.3% 21.4% 20.7% < Prev in 17 of 28 F Next > O 11:18PM 20/200
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