USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 38

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.

-Refer to Exhibit 6.14. What is the expected return of the stock A and B portfolio?

• A) 17.0%
• B) 17.5%
• C) 18.0%
• D) 18.5%
• E) 19.0%

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