An investor can design a risky portfolio based on two stocks

Assignment Help Financial Management

Reference no: EM131064036

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. The standard deviation of return on the optimal risky portfolio is _________.

A. 0% B. 5% C. 7% D. 20% E. None of the above

Please show work.

Reference no: EM131064036

Questions Cloud

Beneficiary of the assets : 1. Wife should be given the right to designate her estate as the beneficiary of the assets remaining in the Exemption Trust at her death. 2. Wife should be given the right to invade principal of the Survivor's Trust with or without regard to her ..

Stock provides risk premium for exposure to market risk : The two-factor model on a stock provides a risk premium for exposure to market risk of 9%, a risk premium for exposure to interest rate risk of (-1.3%), and a risk-free rate of 3.5%. The beta for exposure to market risk is 1, and the beta for exposur..

Expected return on the minimum-variance portfolio : An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20%, while the standard deviation on stock B is 15%. The correlation coefficient between the returns on A and B is 0%. The expected ..

Create your own heartfelt awareness campaign : Your presentation needs to be based on factual/researched information and must "pitch" a solution so that people feel gravitated to become a part of your campaign.

An investor can design a risky portfolio based on two stocks : An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation co..

Academic referencing skills exercise : Write 3 brief reports (250 words each) summarising one of the key ideas from each of the articles listed below. The articles are discussed in Seminars one, two and three. In each report you are required to refer to the relevant article at least tw..

Risky portfolio expected return is at least : Treasury bills are paying a 4% rate of return. A risk-averse investor with a risk aversion of A = 3 should invest entirely in a risky portfolio with a standard deviation of 24% only if the risky portfolio's expected return is at least ______.

Good defense against illegally sharing movies or music : Do you agree or disagree with the federal appeals decision? Why or why not? Why isclaiming a lack of copyright knowledge not a good defense against illegally sharing movies ormusic?

What is the new elasticity exposure coefficient of equity : Next year's expected operating cash flow of a Norwegian-owned subsidiary in France is NOK 200 million. The exposure-elasticity of the operating cash flow is 2.00. The exchange rate is NOK 8.00/EUR and the subsidiary's cost of capital is 10%. If all d..

User Account

All Pages