The daily returns of a stock are modeled by a normal distribution with a mean of 0.8%
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Question:
The daily returns of a stock are modeled by a normal distribution with a mean of 0.8% and a standard deviation of 1.2%. An investor wants to construct a portfolio that consists of this stock and a risk-free asset. The risk-free rate is 0.3%. The investor wants the portfolio to have a standard deviation of 0.9% and expects a return of at least 1.2%. Determine the weight of the stock in the portfolio that the investor should hold.
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
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