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A two-asset portfolio's risk and return are provided in the following table. European Bond Weight U.S. Stock Weight Portfolio Standard Deviation Portfolio Rate of Return
A two-asset portfolio's risk and return are provided in the following table.
European Bond Weight | U.S. Stock Weight | Portfolio Standard Deviation | Portfolio Rate of Return |
100% | 0% | 5% | 4% |
80% | 20% | 4% | 5% |
60% | 40% | 3% | 6% |
40% | 60% | 4% | 7% |
20% | 80% | 5% | 8% |
0% | 100% | 6% | 9% |
For an investor who considers only these two classes of assets and is willing to take risk up to a standard deviation of 4%, what is the optimal portfolio combination?
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A. 0% bond and 100% stock
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B. 40% bond and 60% stock
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C. 100% bond and 0% stock
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D. 60% bond and 40% stock
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