An Investor Can Design a Risky Portfolio Based on Two

question 54

Multiple Choice

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 coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is ________.

• A) 25.5%
• B) 22.3%
• C) 21.4%
• D) 20.7%

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Definitions:

Industrialization

The process of developing industries in a country or region on a wide scale.

Mass Transportation

Infrastructure established to transport a significant population effectively in cities and surrounding suburbs, encompassing vehicles such as buses, trains, subways, and trams.

Land Availability

The extent to which usable land is accessible for a specific purpose, such as agriculture, urban development, or conservation.

Pollution Prevention

Strategies and practices aimed at reducing or eliminating sources of pollution to prevent damage to the environment.