An Investor Can Design a Risky Portfolio Based on Two

question 65

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 standard deviation of return on the optimal risky portfolio is ________.

• A) 0%
• B) 5%
• C) 7%
• D) 20%

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Definitions:

Sales Reps

Individuals who represent a company's products or services, often responsible for negotiating and closing sales deals.

Horizontal Axis

A line or scale in a chart or graph that runs horizontally, usually representing the independent variable in a dataset.

Switch Row/Column Command

A function in spreadsheet software that allows the user to switch the positions of rows and columns, often used for better data visualization.

Vertical Axis

The y-axis in a chart or graph, typically displaying numerical values that are measured against the horizontal axis.