An Investor Can Design a Risky Portfolio Based on Two

question 36

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 0.4. The risk-free rate of return is 5%.
-The standard deviation of the returns on the optimal risky portfolio is _________.

• A) 25.5%
• B) 22.3%
• C) 21.4%
• D) 20.7%

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Definitions:

Implicit Personality Theory

A psychological theory suggesting that individuals use a small set of traits and behaviors to make assumptions and judgments about the personalities of others.

Predictive Relationship

A form of correlation where one variable can be used to predict the behavior of another variable.

Attractiveness

A quality that appeals to the senses or emotions, making something or someone appealing or desirable.

Sexual Orientation

A person's pattern of emotional, romantic, or sexual attraction to others, categorized by the gender(s) to which one is attracted.