Question: Below are the expected return and standard deviation of two stocks, A and B: Stock A: E(r)=9% STD=12% Stock B: E(r)=18% STD=25% The correlation between

Below are the expected return and standard deviation of two stocks, A and B:

Stock A: E(r)=9% STD=12%

Stock B: E(r)=18% STD=25%

The correlation between these two stocks is -50%.

You want to create a portfolio containing these two stocks that has a standard deviation equal to 20%. Making sure you invest in an efficient portfolio, what weight should you put on each stock in your two-stock portfolio? What would be this portfolios expected return?

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