An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of .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 between the returns of A and B is -0.4. The risk-free rate of return is .05. What is the expected return on the optimal risky portfolio (rounded to the nearest .0001)?
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of .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 between the returns of A and B is -0.4. The risk-free rate of return is .05. What is the expected return on the optimal risky portfolio (rounded to the nearest .0001)?
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter1: Functions
Section1.2: The Least Square Line
Problem 1E
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![An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of .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 between the returns of A and B
is -0.4. The risk-free rate of return is .05. What is the expected return on the optimal risky portfolio (rounded to the nearest .0001)?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F08e5da1f-7ff5-4a3a-ae83-22ae4b63090a%2F13795a1f-d452-4ff0-a37c-9ca1a0359703%2Faqyvyx_processed.png&w=3840&q=75)
Transcribed Image Text:An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of .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 between the returns of A and B
is -0.4. The risk-free rate of return is .05. What is the expected return on the optimal risky portfolio (rounded to the nearest .0001)?
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