Stock a Has an Expected Return of 10% and a Standard

question 112

Multiple Choice

Stock A has an expected return of 10% and a standard deviation of 10%. Stock B has an expected return of 15% and a standard deviation of 20%. The two stocks are perfectly negatively correlated ( $$\text { Q1,2 }$$ = -1) . What set of weights yields a portfolio with a zero variance?

• A)2/3 in Stock A; 1/3 in Stock B
• B)2/3 in Stock B; 1/3 in Stock A
• C)2 in Stock A; -1 in Stock B
• D)2 in Stock B; -1 in Stock A
• E)None of the above.

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