An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 24%, while the standard deviation on stock B is 14%. The correlation coefficient between the returns on A and B is .35. The expected return on stock A is 25%, while on stock B it is 11%. The proportion of the minimum-variance portfolio that would be invested in stock B is approximately ________.
A) 45%
B) 67%
C) 85%
D) 92%

Question

Quizplus · Accepted Answer

W_B= 11eaaae8_8b67_7905_a4b8_dfac1e070c84_TB6474_00 COV _AB = ρAB^σA^σB = (.35)(.24)(.14) = .01176 W_B = 11eaaae8_8b67_7906_a4b8_f5de88688a2d_TB6474_00 = 85%

An Investor Can Design a Risky Portfolio Based on Two