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An investor can design a risky portfolio based on two stocks, A and B. Stock A...

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 25%. Stock B has an expected return of 12% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is 0.2. The risk-free rate of return is 1.5%.

A.)Approximately what is the proportion of the optimal risky portfolio that should be invested in Stock B?(HINT-0.636 IS NOT THE ANSWER-MARKET WRONG)

B.)What is the Expected Return on the Optimal Portfolio?

C.) What is the REWARD to VARIABILITY Ratio of the Optimal Portfolio?

Show where you input the numbers to follow the formula, thank you.

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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