An Investor Can Design a Risky Portfolio Based on Two

question 54

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

• A)0%
• B)5%
• C)7%
• D)20%

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Definitions:

Monteverde Cloud Forest

A unique and biodiverse forest in Costa Rica known for its high humidity and the frequent, low-level cloud cover at the canopy level.

Preservation

The process of maintaining or protecting something in its original or existing state, from environmental conditions or human activities.

Nitrogen Oxides

Refers to a group of gases composed of nitrogen and oxygen, such as NO and NO2, which are significant environmental pollutants.

Combustion

A chemical reaction that occurs when a substance reacts with oxygen to release energy in the form of heat and light, often resulting in fire.