An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20%, while the standard deviation on stock B is 15%. The correlation coefficient between the returns on A and B is 0%. The rate of return for stocks A and B is 20% and 10% respectively. The standard deviation of return on the minimum-variance portfolio is ________.
A) 0%
B) 6%
C) 12%
D) 17%

Question

Quizplus · Accepted Answer

W_A = 11eaaae8_8b67_c729_a4b8_87c4270500b1_TB6474_00 = 11eaaae8_8b67_c72a_a4b8_11cb7026fad8_TB6474_00 = 0.36; W_B 0.64; E(rp) = (.36)(.20) + (.64)(.10) = .136 σ = 11eaaae8_8b67_c72b_a4b8_f93d22508978_TB6474_00 = .12

An Investor Can Design a Risky Portfolio Based on Two