An Investor Can Design a Risky Portfolio Based on Two

question 84

Multiple Choice

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. The proportion of the optimal risky portfolio that should be invested in stock A is ________.

• A) 0%
• B) 40%
• C) 60%
• D) 100%

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Definitions:

Connotations

Refers to the implied or suggested meanings associated with a word beyond its literal definition, often evoking emotional responses.

Nonverbal Messages

Communication expressed through body language, facial expressions, gestures, posture, and tone of voice rather than spoken words.

Leakage Cues

Subconscious signs of hidden emotions or intentions that may leak out through nonverbal behavior.

Chronemics

The study of how people use and structure time.