Suppose that you have $1 million and the following two opportunities from which to construct a portfolio:

a. Risk-free asset earning 12% per year.

b. Risky asset with expected return of 30% per year and standard deviation of 40%.

If you construct a portfolio with a standard deviation of 30%, what is its expected rate of return?

The following data are for Problems 17 through 19: The correlation coefficients between several pairs of stocks are as follows: Corr(A, B) = .85; Corr(A, C) = .60; Corr(A, D) = .45. Each stock has an expected return of 8% and a standard deviation of 20%. P-968