An Investor Can Design a Risky Portfolio Based on Two

question 48

Multiple Choice

An investor can design a risky portfolio based on two shares, A and B. Share A has an expected return of 18% and a standard deviation of return of 20%. Share 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 0.50. The risk-free rate of return is 10%. The proportion of the optimal risky portfolio that should be invested in Share A is ________.

• A)0%
• B)40%
• C)60%
• D)100%

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Definitions:

Prepositional Phrases

Groups of words in a sentence made up of a preposition and its object, functioning as modifiers or complements.

Obey

To follow the directions or commands given by someone in authority.

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A manual skill involving the tying of laces on shoes, typically learned in early childhood as part of developing fine motor abilities.

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A fundamental principle of classical physics that states that matter cannot be created or destroyed in an isolated system.