Stock A has an expected return of 20% and a standard deviation of 35 %. Stock B has an expected return of 11% and a standard deviation of 12%. The risk-free rate is 7.7% and the correlation between Stock A and Stock B is 0.9. Build the optimal risky portfolio of Stock A and Stock B. What is the standard deviation of this portfolio?
Stock A has an expected return of 20% and a standard deviation of 35 %. Stock B has an expected return of 11% and a standard deviation of 12%. The risk-free rate is 7.7% and the correlation between Stock A and Stock B is 0.9. Build the optimal risky portfolio of Stock A and Stock B. What is the standard deviation of this portfolio?
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:Stock A has an expected return of 20% and a standard deviation of 35 %. Stock B has an expected return of
11% and a standard deviation of 12%. The risk-free rate is 7.7% and the correlation between Stock A and
Stock B is 0.9. Build the optimal risky portfolio of Stock A and Stock B. What is the standard deviation of this
portfolio?
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