Capitial Investment hired a new analyst Jack Lee to evaluate a portfolio consisting of two stocks, Meta Platforms Inc (FB) and Walmart Inc (WMT). After exercising due diligence, Jack forecasts FB stock has an expected return of 15% and standard deviation of 25%, while WMT stock has an expected return of 10% and standard deviation of 20%. The correlation coefficient between stock returns of FB amd WMT is 0.4 and risk-free rate is 3%. If Jack is asked to design a optimal portfolio based on the above forecast, the proportion of the optimal risky portfolio that should be invested in WMT stock is O 52.3% O 36.7% O 63.3% O 47.7%

Capitial Investment hired a new analyst Jack Lee to evaluate a portfolio consisting of two stocks, Meta Platforms Inc (FB) and Walmart Inc (WMT). After exercising due diligence, Jack forecasts FB stock has an expected return of 15% and standard deviation of 25%, while WMT stock has an expected return of 10% and standard deviation of 20%. The correlation coefficient between stock returns of FB amd WMT is 0.4 and risk-free rate is 3%. If Jack is asked to design a optimal portfolio based on the above forecast, the proportion of the optimal risky portfolio that should be invested in WMT stock is O 52.3% O 36.7% O 63.3% O 47.7%

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 4P: An analyst gathered daily stock returns for Feburary 1 through March 31, calculated the Fama-French...

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