What is the expected return on the optimal risky portfolio

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An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return on 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is 0.4. The T-Bill rate of return is 5%.

A) The portion of the optimal risky portfolio that should be invested in stock B is what?

B) What is the expected return on the optimal risky portfolio?

C) Investors wants to have an expected return of 10% for a complete portfolio. What proportion of his investment is in T-Bills?

D) What proportion of the investor's complete portfolio is in stock A and in stock B?

Reference no: EM131522503

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