Suppose that there are many stocks in the security market and that the characteristics of stocks...
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Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock A Expected Return 10% B 15% Correlation = -1 Standard Deviation 6% 14% A. What will be the weight of A and B in the minimum risk portfolio consisting of stocks A and B? B. What is the standard deviation of the minimum risk portfolio? C. Suppose that it is possible to borrow at the risk-free rate. What must be the value of the risk-free rate? D. Let us denote the above minimum risk portfolio by "MV." If a risk neutral investor could hold only one of the three assets (A, B, or MV), which one will he choose? Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock A Expected Return 10% B 15% Correlation = -1 Standard Deviation 6% 14% A. What will be the weight of A and B in the minimum risk portfolio consisting of stocks A and B? B. What is the standard deviation of the minimum risk portfolio? C. Suppose that it is possible to borrow at the risk-free rate. What must be the value of the risk-free rate? D. Let us denote the above minimum risk portfolio by "MV." If a risk neutral investor could hold only one of the three assets (A, B, or MV), which one will he choose?
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