Suppose you have just inherited a sum of $50,000 and you are considering investing it in the
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Suppose you have just inherited a sum of $50,000 and you are considering investing it in the stock market. You have identified two stocks, Stock A and Stock B, which have expected returns of 12% and 10%, respectively. The expected standard deviation of Stock A is 20%, while the expected standard deviation of Stock B is 15%. You are risk-averse and prefer a portfolio with lower risk. Assuming that the two stocks are not perfectly correlated, what is the optimal allocation of the $50,000 between the two stocks to minimize portfolio risk? Show all your calculations.
Related Book For
Statistics Informed Decisions Using Data
ISBN: 9780134133539
5th Edition
Authors: Michael Sullivan III
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