Question: Answers are given, need to know how to get part V. You consider forming a portfolio of two stocks, A and B. Stock A has

Answers are given, need to know how to get part V. You consider forming a portfolio of two stocks, A and B. Stock A has an expected return of 20% and a standard deviation of return of 30%. Stock B has an expected return of 30% and a standard deviation of return of 50%. Stock A has a portfolio weight of 40%, the risk-free rate is 10%, and the correlation between the two stocks is 0.10.

i. What is the expected return on the portfolio formed with A and B? (26%)

ii. What is the standard deviation of the portfolio formed with A and B? (33.41%)

iii. What is the weight of B in the minimum-variance portfolio formed from A and B? (24.19%)

iv. What is the covariance between A and B? (0.015)

v. What are the return-variability ratios of stocks A and B, respectively? (0.33, 0.40)

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