An Investor Can Design a Risky Portfolio Based on Two

question 24

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 0.50. The risk-free rate of return is 10%.
-The proportion of the optimal risky portfolio that should be invested in stock A is _________.

• A) 0%
• B) 40%
• C) 60%
• D) 100%

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Definitions:

Genes

units of heredity that are transferred from a parent to their offspring and determine some characteristic of the offspring.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of deoxyribonucleic acid (DNA).

Right Upper Quadrant

An area of the abdomen divided for clinical purposes, containing organs such as the liver, right kidney, and gallbladder.

Deoxyribonucleic Acid

A molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.