Consider the following two stocks: Stock A Stock B Expected Return 0.18 0.13 Standard Deviation 0.45...

 

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Consider the following two stocks: Stock A Stock B Expected Return 0.18 0.13 Standard Deviation 0.45 0.20 Beta 0.49 1.27 Correlation 0.4 A. If an investor invests 40% of her money in Stock A and the rest of the money in Stock B, what is the expected return and standard deviation of her portfolio. B. On a diagram, plot standard deviation on the horizontal axis, and put expected return on the vertical axis, i. roughly draw the opportunity set for all the possible combinations of the two stocks given the correlation coefficient of 0.3; ii. draw the opportunity set again assuming a correlation coefficient of -1. You don't have to be accurate with the diagram, no calculation is required. C. If the investor wants to create a portfolio with a beta of 0.9, what would be the weights of the two stocks in the portfolio? Consider the following two stocks: Stock A Stock B Expected Return 0.18 0.13 Standard Deviation 0.45 0.20 Beta 0.49 1.27 Correlation 0.4 A. If an investor invests 40% of her money in Stock A and the rest of the money in Stock B, what is the expected return and standard deviation of her portfolio. B. On a diagram, plot standard deviation on the horizontal axis, and put expected return on the vertical axis, i. roughly draw the opportunity set for all the possible combinations of the two stocks given the correlation coefficient of 0.3; ii. draw the opportunity set again assuming a correlation coefficient of -1. You don't have to be accurate with the diagram, no calculation is required. C. If the investor wants to create a portfolio with a beta of 0.9, what would be the weights of the two stocks in the portfolio?