An investor can design a risky portfolio based on two stocks. Stock X has an expected return of 21% and a standard deviation of return of 39%. Stock Y has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the two stocks is 0.4. The risk-free rate of return is 5%. The expected return on the optimal risky portfolio is approximately __________. (Hint: Find weights first.)

Multiple Choice

• 16%

• 14%

• 18%

• 19%