An investor has a portfolio of two stocks, Stock A and Stock B, with the following statistics:

Stock A has an expected return of 12% and a standard deviation of 20%.

Stock B has an expected return of 9% and a standard deviation of 12%.

The correlation between the returns of Stock A and Stock B is -0.3.

The investor wants to minimize the portfolio risk subject to a minimum expected return of 10%. What is the optimal portfolio allocation and what is the portfolio's expected return and standard deviation?

Answer rating: 100% (QA)

The detailed answer for the above question is provided below To find the optimal portfolio allocation we need to use the meanvariance portfolio optimi... View the full answer