An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 9.0% Stock 8 has an expected return of 12% and a standard deviation of return of 3%. The correlation coefficient between the returns of A and 8 is 0.60. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 9.0% Stock 8 has an expected return of 12% and a standard deviation of return of 3%. The correlation coefficient between the returns of A and 8 is 0.60. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is
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
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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 16% and a standard deviation of return of 9.0%
Stock B has an expected return of 12% and a standard deviation of return of 3%. The correlation coefficient between the returns of A and B is 0.60. The
risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock Ais
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0%
60%
51%
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