Asset A offers an expected rate of return of 25%, with a standard deviation of 20%. Asset B offers an expected return of 15% with a standard deviation of 30%. The risk-free asset offers 5%. Suppose that the correlation coefficient between asset A and asset B equals 1. Please specify the portfolio weight on asset A in the optimal risky 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
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Asset A offers an expected rate of return of 25%, with a standard deviation of 20%. Asset B offers an expected
return of 15% with a standard deviation of 30%. The risk-free asset offers 5%. Suppose that the correlation
coefficient between asset A and asset B equals 1. Please specify the portfolio weight on asset A in the optimal
risky portfolio.
Your answer should be a entered as a decimal rounded to two decimal places, e.g., enter 63% as 0.63.
Transcribed Image Text:Asset A offers an expected rate of return of 25%, with a standard deviation of 20%. Asset B offers an expected return of 15% with a standard deviation of 30%. The risk-free asset offers 5%. Suppose that the correlation coefficient between asset A and asset B equals 1. Please specify the portfolio weight on asset A in the optimal risky portfolio. Your answer should be a entered as a decimal rounded to two decimal places, e.g., enter 63% as 0.63.
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