Question: 2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return

2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return 20%, B has expected return of 20% and standard deviation of return 10%. The correlation coefficient between A and B is 0.5. The risky free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in A is ? (10 points)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Over the past several years, Claire Jackson, CEO and founder of Easy Learning (EL), has been working to expand operations outside of Canada. In particular, she has placed two longtime, trusted...

Question 10 (1 point) (Extra credit) An investor can design a risky portfolio based on two stocks, A and B. The expected return and standard deviation of stocks A and B are as below: Stock A Stock B...

2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return 20%. B has expected return of 20% and standard deviation of return...

please show all steps with work 2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return 20%. B has expected return of 20%...

please show all steps with work to know how to solve (not excel) 2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return...

An investor can design a risky portfolio based on two stocks, A and B . The expected return and standard deviation of stocks A and B are as below: Expected return Std dev Stock A 2 0 % 2 4 % Stock B...

You form a risky-risky portfolio composed of two stocks: A and B. Stock Expected Return (mean) Standard Deviation A 18% 30% B 6% 15% Correlation p=0.2 The mean and the standard deviation of the A-B...

An investor can design a risky portfolio based on two stocks. Stock X has an expected return of 21% and a standard deviation of return of 39%. Stock Y has an expected return of 14% and a standard...

1. Consider the following information about a risky portfolio that you manage, and a risk- free asset: Expected return= 15%, standard deviation = 20%, risk free rate =5%. i) ii) Your client wants to...

An investor can design a risky portfolio based on two stocks, A and B. The expected returns on A and B are 10% and 6%, respectively. The standard deviations on A and B are 15% and 9%, respectively....

Arizona Instruments uses integrated circuits (ICs) in its business calculators. Its annual demand for ICs is 120,000 units. The ICs cost Arizona Instruments $10 each. The company has determined that...

Calculate the required value of the inversion population to obtain a coefficient of gain (1 m-1) for the Nd-YAG laser (1.06 m) when the upper-life time (T, = 230 S), Av = 3 10 13 Hz and with 1.83 as...

7. Comment on the estate shrinkage experienced for Philips estate. What might have been done to reduce this shrinkage? Explain.

Which of the following are problems with identifying users of ABC? Multiple select question. ABC means different things to different organizations. Organizations will announce the discontinuance of...

2. Identify the purpose of your speech

5. Cull from among your sources the material that will be most convincing

4. In this chapter, we talked about some of the challenges that todays organizations face, including worklife balance, sexual harassment, and communication technology. Does your organizationbe it a...