Consider two stocks, A and B. Stock A has an expected return of 12% with a standard deviation of 20%, and Stock B has an expected return of 16% with a standard deviation of 30%. The correlation coefficient between the returns of Stock A and Stock B is 0.4, and the risk - free rate is 4%. If you plan to invest $20,000 in a portfolio consisting of these two stocks, the optimal dollar amount to invest in Stock A to maximize the portfolio's Sharpe ratio is: a. $12,000 b. $10,000 c. $8,000 d. $15,000 e. $6,000

Consider two stocks, A and B. Stock A has an expected return of 12% with a standard deviation of 20%, and Stock B has an expected return of 16% with a standard deviation of 30%. The correlation coefficient between the returns of Stock A and Stock B is 0.4, and the risk - free rate is 4%. If you plan to invest $20,000 in a portfolio consisting of these two stocks, the optimal dollar amount to invest in Stock A to maximize the portfolio's Sharpe ratio is: a. $12,000 b. $10,000 c. $8,000 d. $15,000 e. $6,000

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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