An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 16.0%. Stock B has an expected return of 11% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. 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 15% and a standard deviation of return of 16.0%. Stock B has an expected return of 11% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is __

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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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 0.14 and a standard deviation of return of 0.18. Stock B has an expected return of 0.15 and a standard deviation of return of 0.23. The correlation coefficient between the returns of A and B is 0.67. The risk-free rate of return is 0.11. The proportion of the optimal risky portfolio that should be invested in stock A is Please answer in decimal terms rounded to four decimal places.
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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 expected return on the optimal risky portfolio is approximately ____?____. Using the risk and return profile calculated in Q10 and Q11 (standard deviation of the optimal risky portfolio is 21.4%), what is the percentage weight that you need to invest in the optimal risky portfolio if you want your complete portfolio to achieve 12% return? ___?___
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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 15% and a standard deviation of return of 25%. Stock B has an expected return of 10% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is 0.5. The risk-free rate of return in this economy is 4%. The investor wishes to construct an optimal risky E[rp]-rf portfolio (i.e. the portfolio with the highest Sharpe ratio = -). The proportion of the optimal risky portfolio that should be invested in stock A is 65.14% 82.25% 71.15% 74.36% 68.20%