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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 14% and a standard deviation of return of 20%. Stock B has an expected return of 21% and a standard deviation of return of 39%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. Would the proportion of the optimal risky portfolio that should be invested in stock A be .71 or .29?

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Please upvote if the ans is helpful.In case of doubt do comment.Thanks.

jeff jeffy answered 1 year ago
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