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%

---

Definitions:

Price

Price is the amount of money required to purchase a good or service, set by the interplay of supply and demand in the market.

Resource Extraction

The process of obtaining natural resources from the Earth, such as minerals, oil, and gas, for human use.

Present

Current time or the moment that is happening now.

Future Extraction

Strategic planning for the removal or usage of natural resources, regarding supply and demand, technological advancements, and environmental impacts.