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What is the expected return of the mve portfolio

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Reference no: EM132828365

There are two stocks, A and B, and a risk-free rate of 5%. Stock A has an expected return of 12% and a standard deviation of 20%. Stock B has an expected return of 8% and a standard deviation of 16%. The MVE ("tangency") portfolio consists of 75% A and 25% B. Its standard deviation is 12%.

a. What is the expected return of the MVE portfolio?

b. What is the correlation between stocks A and B?

c. An investor's optimal portfolio has a standard deviation of 20%. What is the weight of stock A in her optimal portfolio?

Reference no: EM132828365

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