Stock a Has an Expected Return of 8% and a Standard

question 22

Essay

Stock A has an expected return of 8% and a standard deviation of 40%.Stock B has an expected return of 13% and standard deviation of 60%.The correlation between A and B is -1 (i.e.,they are perfectly negatively correlated).Show that you can form a zero risk portfolio by investing $w _ { A } = \frac { \sigma _ { B } } { \sigma _ { A } + \sigma _ { B } }$ in A and the rest in B.

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Definitions:

Social Networks

Platforms or structures made up of individuals or organizations that are connected by one or more types of interdependencies, such as friendships, kinships, common interests, or professional relationships.

Groupthink

Group pressure to conform despite individual misgivings.

Pressure

The feeling of stress or urgency caused by the demands and expectations of others or by one's own goals or responsibilities.

Conform

To align one's beliefs, attitudes, or behaviors with those of a group or societal norms, often to fit in or be accepted by others.